Was Privateering Plunder Efficient?* Peter T. Leeson† Alex Nowrasteh‡ Abstract This paper argues that when contracts between enemies are enforceable and transaction costs are low, plunderers and their victims benefit from trade that facilitates the former’s ability to plunder the latter. Coasean “plunder contracts” transform part of plunder’s social costs into private benefits for plunderers and their victims. A significant portion of the wealth that plunder would otherwise destroy is preserved instead. The result is more efficient plunder. To investigate our hypothesis we consider maritime marauding in the 18th and 19th centuries. Privateers developed a system of ransom and parole founded on Coasean plunder contracts with victim merchantmen. * We thank Pete Boettke, Tyler Cowen, Chris Coyne, the editor, and two anonymous reviewers for helpful suggestions on an earlier version of this paper and Judith-Jane Stark-Modlin for comments and assistance with accessing several hard-to-find sources. Leeson also thanks the Becker Center on Chicago Price Theory at the University of Chicago, where this research was conducted, and the Mercatus Center at George Mason University. † Email:
[email protected]. Address: George Mason University, Department of Economics, MS 3G4, Fairfax, VA 22030. ‡ Email:
[email protected]. Address: Santa Clara Law, Santa Clara University, 500 El Camino Real, Santa Clara, CA 95053. 1 1 Introduction Every economist knows theft is socially inefficient. From society’s perspective resources thieves use to transfer others’ property to themselves, and resources others use to prevent thieves from stealing their property, are wasted. The social costs of violent theft—of plunder—are larger still.