Summary Of Peter T. Leeson's 'Invisible Hook'

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Adam Smith’s invisible hand is a concept all students who take any high school or college level economics learn. Though Adam Smith first discussed his idea in 1759, it could still be used to discuss mankind’s choices and intentions for hundreds of years before that. The Invisible Hook by Peter T. Leeson deviated the idea of the invisible hand specifically for pirates in the 17th and 18th century. Leeson analyzed pirates’ lifestyles in order to prove that they were, in fact, self-interested people who made decisions to maximize their profits. The author discussed how pirate’s followed common economic principles, in my review I will discuss in more depth why many sailors preferred the pirate life as opposed to working on a merchant ship, how…show more content…
Sailors on pirate ships had the opportunity of making more money, were free from abuse of merchant ship captains, and had the opportunity to express their anger at abusive captains along with the government that has allowed them to do so. Thus, most sailors have revealed a preference for pirate life over working on a merchant ship. We can also bring in ideas of Consumption Variation and Equivalent Variation into this context. If sailors were paid a lot more, perhaps they would not care about abusive captains and just deal with it. Sailors could have also been paid less, and the reduction of pay allowed for a government official to accompany them to insure that there is no abuse on the…show more content…
For a pirate ship to be profitable (total profit is always 0, but that is because all profits will be paid as wages to the crew) there are many necessary inputs. Those inputs include wage, weapons, ship condition, reputation, and many more. In the short run, I would have every input be fixed except for wage because wage has the most impact on the profitability of the pirate ship. If pirates earned no wage, they would not put in any effort to find ships to rob. Given that if they put in enough effort, they will be paid the same wage as most pirates on the ship. Pirate constitutions also put into effect compensation if they lost any limbs. This compensation encourages more effort when combat is necessary. On top of that Leeson states “pirate articles contained incentive provisions that paid bonuses to crew members who displayed exceptional courage in battle, were the first to spot potential targets, and so forth, out of the common purse”(72). Since pirates also produce at a point where their average variable cost is equal to their profit from robbery, a pirate ship that gains more from robbery has the ability to pay more wages out to their crew. This encourages pirates to want to put in more effort because they get extra in wage from showing extra effort along with increasing the pool of money that the ship will later split among the crew. In the long run, an increase in ship condition (speed, stealth), reputation, and weapons could

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