Pirational Choice: The Economics of Infamous Pirate Practices Peter T. Leesony Abstract This paper investigates the economics of infamous pirate practices. Two closely related eco- nomic theories— the theory of signaling and the theory of reputation building— explain these practices. First, I examine the pirate ‡ag, “Jolly Roger,” which pirates used to signal their identity as unconstrained outlaws, enabling them to take prizes without costly con‡ict. Second, I consider how pirates combined heinous torture, public displays of “madness,” and published advertisement of their …endishness to establish a reputation that prevented costly captive be- haviors. Pirates’infamous practices reduced their criminal enterprise’s costs and increased its revenues, enhancing the pro…tability of life “on the account.” I’m especially grateful to seminar participants at the University of Chicago and New York University for their insightful and thorough comments on an earlier draft of this paper. I also thank the editor, two anonymous referees, Pete Boettke, Tyler Cowen, Chris Coyne, Edward Glaeser, Russ Sobel, Bill Trumbull, and Claudia Williamson for helpful remarks and suggestions, and the Becker Center on Chicago Price Theory at the University of Chicago and the Mercatus Center at George Mason University where this research was partly conducted. Doug Rogers provided excellent research assistance. This paper contains and extends material from the author’sbook, The Invisible Hook: The Hidden Economics of Pirates (Princeton University Press, 2009). yEmail:
[email protected]. Address: Department of Economics, George Mason University, MSN 3G4, Fairfax, VA 22030. 1 1 Introduction Few characters in history inspire as much fascination or mystery as pirates.