Skip to main content

Piracy, Inc.—on the bearing of the firm analogy to pirate organization

Abstract

Peter T. Leeson’s The Invisible Hook provides an illuminating economic analysis of how pirates established governance structures regulating their organization. Leeson is successful in showing economic rationales for piratical institutions and adopts the view of the piratical enterprise as a for-profit business firm to further illustrate the point. This essay argues, however, that modern theories of the firm are not fully compatible with the nature of piratical organization. Rather, pirates seem to have suffered from problems much like those in traditional cooperatives, arising from organizing collective action and joint ownership of the means of production.

This is a preview of subscription content, access via your institution.

Notes

  1. 1.

    Cooperatives are often referred to as “patron-owned firms” in the cooperative literature to distinguish them from “investor-owned firms” or regular business firms (Hansmann 1988, 2000). I will, here, use the terms “cooperative” and “firm” for clarity.

  2. 2.

    Asset specificity is defined as “durable investments that are undertaken in support of particular transactions, the opportunity cost of which investments is much lower in best alternative uses or by alternative users should the original transaction be prematurely terminated” (Williamson 1985, p. 55).

  3. 3.

    Compare Hansmann’s statement on cooperative governance that it is common for them “to require that most members of the board of directors also be members of the cooperative” and “that all or nearly all of the cooperative’s directors not be hired managers” (Hansmann 1999, p. 397).

References

  1. Alchian, A. A., & Demsetz, H. (1972). Production, information costs and economic organization. American Economic Review, 62(5), 777–795.

    Google Scholar 

  2. Burress, M. J., & Cook, M. L. (2009). A primer on collective entrepreneurship: A preliminary taxonomy. University of Missouri, Department of Agricultural Economics Working Papers. Columbia, Mo., University of Missouri, p 32.

  3. Chaddad, F. R., & Cook, M. L. (2004). Understanding new cooperative models: An ownership-control rights typology. Review of Agricultural Economics, 26(3), 348–360.

    Article  Google Scholar 

  4. Chiles, T. H., & McMackin, J. F. (1996). Integrating variable risk preferences, trust, and transaction cost economics. The Academy of Management Review, 21(1), 73–99.

    Article  Google Scholar 

  5. Coase, R. H. (1937). The nature of the firm. Economica, 4(16), 386–405.

    Article  Google Scholar 

  6. Cook, M. L., & Iliopoulos, C. (2000). Ill-defined property rights in collective action: The case of U.S. agricultural cooperatives. In C. Ménard (Ed.), Institutions, contracts and organizations (pp. 335–348). London: Edward Elgar Publishing.

    Google Scholar 

  7. Cook, M. L., & Plunkett, B. (2006). Collective entrepreneurship: An emerging phenomenon in producer-owned organizations. Journal of Agricultural and Applied Economics, 38(2), 421–428.

    Google Scholar 

  8. Grossman, S. J., & Hart, O. D. (1986). The costs and benefits of ownership: A theory of vertical and lateral integration. The Journal of Political Economy, 94(4), 691–719.

    Article  Google Scholar 

  9. Hansmann, H. (1988). Ownership of the firm. Journal of Law, Economics, and Organization, 4(2), 267–304.

    Google Scholar 

  10. Hansmann, H. (1999). Cooperative firms in theory and practice. LTA, 48(4), 387–403.

    Google Scholar 

  11. Hansmann, H. (2000). The ownership of enterprise. Cambridge: MA, Harvard University Press.

    Google Scholar 

  12. Hart, O., & Moore, J. (1990). Property rights and the nature of the firm. Journal of political economy, 98(6), 1119–1158.

    Article  Google Scholar 

  13. Hayek, F. A. (1937). Economics and knowledge. Economica, 4(13), 33–54.

    Article  Google Scholar 

  14. Hayek, F. A. (1945). The use of knowledge in society. American Economic Review, 35(4), 519–530.

    Google Scholar 

  15. Hayek, F. A. (1978). Competition as a discovery process. New Studies in Philosophy, Politics, Economics, and the History of Ideas, pp 179–190.

  16. Holmström, B., & Milgrom, P. (1994). The firm as an incentive system. The American Economic Review, 84(4), 972–991.

    Google Scholar 

  17. Klein, B., Crawford, R. A., et al. (1978). Vertical integration, appropriable rents, and the competitive contracting process. Journal of Law and Economics, 21(2), 297–326.

    Article  Google Scholar 

  18. Leeson, P. T. (2007). An-arrgh-chy: the law and economics of pirate organization. Journal of Political Economy, 115(6), 1049–1094.

    Article  Google Scholar 

  19. Leeson, P. T. (2009). Invisible Hook: The hidden economics of pirates. Princeton, NJ: Princeton University Press.

    Google Scholar 

  20. Olson, M. (1971). The logic of collective action: Public goods and the theory of groups. Cambridge: MA, Harvard University Press.

    Google Scholar 

  21. Prendergast, C. (1999). The provision of incentives in firms. Journal of Economic Literature, 37(1), 7–63.

    Google Scholar 

  22. Pringle, P. (1953). Jolly Roger: The story of the great age of piracy. New York: Norton.

    Google Scholar 

  23. Simon, H. A. (1957a). Administrative behavior: A study of decision-making processes in administrative organization. New York: MacMillan Company.

    Google Scholar 

  24. Simon, H. A. (1957b). Models of man: Social and rational. New York: John Wiley & Sons.

    Google Scholar 

  25. Simon, H. A. (1957c). A formal theory of the employment relation. In H. A. Simon (Ed.), Models of man (pp. 183–195). New York: John Wiley & Sons.

    Google Scholar 

  26. Williamson, O. E. (1979). Transaction-cost economics: The governance of contractual relations. The Journal of Law and Economics, 22(2), 3–61.

    Article  Google Scholar 

  27. Williamson, O. E. (1985). The economic institutions of capitalism. New York: Free Press.

    Google Scholar 

  28. Williamson, O. E. (1991). Comparative economic organization: the analysis of discrete structural alternatives. Administrative Science Quarterly, 36(2), 269–296.

    Article  Google Scholar 

  29. Williamson, O. E. (1996). The mechanisms of governance. Oxford University Press.

  30. Williamson, O. E., Wachter, M. L., et al. (1975). Understanding the employment relation: the analysis of idiosyncratic exchange. The Bell Journal of Economics, 6(1), 250–278.

    Article  Google Scholar 

Download references

Author information

Affiliations

Authors

Corresponding author

Correspondence to Per L. Bylund.

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Bylund, P.L. Piracy, Inc.—on the bearing of the firm analogy to pirate organization. Rev Austrian Econ 23, 299–305 (2010). https://doi.org/10.1007/s11138-010-0106-4

Download citation

Keywords

  • Theory of the firm
  • Organization
  • Ownership
  • Pirates

JEL codes

  • D21
  • J54
  • L10
  • L22
  • L23
  • Q13