The Economics Of Somali Piracy

Over at VC there is a great post by Prof Peter Leeson about the economics of Somali Piracy,

Despite the surge in Somali piracy and encouragement from some employees of the U.S. government, commercial ships aren’t choosing to put armed guards on their vessels. And with good reason: given present conditions, anyway, it’s a bad idea.

As I discuss in The Invisible Hook, like their Caribbean forefathers, Somali pirates are in the business of making money, not harming hostages. Of the 815 hostages Somali pirates took last year, only four died and two were injured under pirate care.

Pirates aren’t treating hostages well because they’re nice guys. They’re treating hostages well because it pays to do so. A dead hostage fetches no ransom and pirates’ business model would collapse if they injured prisoners or allowed them to die. The economics of piracy has a simple bottom line: for all the problems piracy may pose, the threat of dead and injured innocents isn’t one of them.

yojoe out

One Response

  1. It’s also cheaper – and safer – to not send ships into the waters near Somalia at all. Wouldn’t doing that get rid of the problem entirely…at least until the next problem comes along? The cheapest solution is rarely, if ever, the best solution.

    And while we’re at it, ‘innocent’ sailors choose to be where they are and do what the do. And invite attacks by being where they are. That they are then attacked is utterly unsurprising

    http://www.axaraylim.com

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: