Pirational Choice: The Economics of Infamous Pirate Practices

Abstract

This paper investigates the economics of infamous pirate practices. Two closely related economic theories---the theory of signaling and the theory of reputation building---explain these practices. First, I examine the pirate flag, "Jolly Roger," which pirates used to signal their identity as unconstrained outlaws, enabling them to take prizes without costly conflict. Second, I consider how pirates combined heinous torture, public displays of "madness," and published advertisement of their fiendishness to establish a reputation that prevented costly captive behaviors. Pirates' infamous practices reduced their criminal enterprise's costs and increased its revenues, enhancing the profitability of life "on the account."