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The wisdom of Gordon Tullock, part II
The U.S. Navy said pirates commandeered a Saudi-owned supertanker bearing more than $100 million worth of crude a few hundred miles off the Kenyan coast, an attack that sharply increases the stakes in an effort by governments and militaries to protect the world's energy-supply lines.
U.S. Navy officials said the hijacking was unprecedented for its distance from shore and the size of its target -- a ship about the length of a U.S. aircraft carrier. The attack appears also to be the first significant disruption of crude shipments in the region by pirates.
Here is the story. Here is Peter Leeson's paper on pirates. I don't yet see it on Amazon, but stay tuned for Peter's forthcoming book The Invisible Hook.
I thank Brad Williams for the pointer.
Addendum: From another article:
The pirates’ profits are set to reach a record $50 million in 2008, Somali officials say. Shipping firms are usually prepared to pay, because the sums are still low compared with the value of the ships.
Posted by Tyler Cowen on November 18, 2008 at 08:28 AM in Current Affairs | Permalink
Comments
So, what Arrrr you sayin'?
"The crew of the hijacked merchant vessel the Faina stood on the deck after a U.S. Navy request to check on their health and welfare, at sea off the coast of Somalia on Nov. 9. The Faina, which is carrying a cargo of Ukrainian T-72 tanks and related military equipment, was seized by pirates Sept. 25 and forced to anchor off the Somali coast."
Gives new meaning to the word "tanker," or I guess it recapitulates the etymology of "tank."
Posted by: Andrew at Nov 18, 2008 8:58:18 AM
Is it the shipping firms that pay, or is it their insurance companies? Or are the firms self-insured?
Posted by: EclectEcon at Nov 18, 2008 9:05:40 AM
Didn't Julius Caesar have an effective method for dealing with pirates? Pay the ransom and then capture and execute them?
Posted by: Rich Berger at Nov 18, 2008 10:10:35 AM
I'm ignorant. What's this have to do with TUllock?
Posted by: jason voorhees at Nov 18, 2008 10:31:14 AM
I'm fairly ignorant of international maritime law, but it would seem to me that it would be advantageous for these shipping companies to hire private security to protect their cargo. $100 million worth of oil would be worth spending some money to protect. I also imagine it wouldn't take much to defend against some rebels in a fishing boat wielding AK-47s and RPGs. Seems like a proficient sniper could cause significant damage to the vessel before they were even close enough to cause damage....but then again, I do not know laws regarding the defense of shipping vessels by non-military agents.
Posted by: Bryan at Nov 18, 2008 10:44:03 AM
The oil markets treated this as a non-event.
Unlike dry cargo ships the pirates will find it impossible to hide this carrier and it will be interesting to see how they plan to profit from the hijacking.
Posted by: spencer at Nov 18, 2008 10:49:48 AM
50 million in profits? Hmmm I wonder if they're going to have an IPO? It seems they are one of the few bright spots in this dismal economy.
Posted by: Steve at Nov 18, 2008 11:11:17 AM
Based on spencer's comment, we can conclude that the business model of these pirates is purely based on collecting ransom and not on reselling the cargo. This is an interesting question. I see some goods being better for reselling (i.e. pharmaceuticals, LCD's). Others, like oil are online good for asking money not to destroy it.
What kind of cargo would make the pirates indifferent between reselling it or asking for ransom?
Posted by: londenio at Nov 18, 2008 11:12:49 AM
Yea me hearties, these scurvy dogs remind me of the Korean fairy tale about the 2 monkeys who caught a tiger in a quilt. Now what do they do with it? Meanwhile, the tiger gets angrier and angrier. . .and the fabric isn't very strong. . .
But seriously isn't this another lesson in why failed nation states just can't be allowed to limp along in anarchy? Somalia seems unimportant and far away, but it's getting to be a PITA.
More serious diplomatic re-engagement seems necessary, unless we just ask the Brits, who are good at this kind of thing, to deal with it for us on the water.
Posted by: StreetWalker at Nov 18, 2008 11:19:08 AM
A major cost in energy shipment (and transcontinental shipping in general) is providing security on the high seas. For too long, the US government (and other governments around the world) have been subsidizing this cost with their naval military spending. Finally, the costs have to be borne out by consumers. I'd say it's a good thing.
http://rationalitate.blogspot.com/2008/11/somali-pirates-in-news-again.html
Posted by: Rationalitate at Nov 18, 2008 11:27:35 AM
Explorations in The Theory of Anarchy by Gordon Tullock
THE ROOTS OF THE SOCIAL DILEMMA
The Roots of Conflict 3
The Cooperative State 13
The Exploitative State 22
but is more the wisdom of Mancur Olson:Power and Prosperity: Outgrowing Communist and Capitalist Dictatorships . He explains why people long for the old totalitarism when they see the results of anarchy
Posted by: k at Nov 18, 2008 12:20:48 PM
londenio, the wise pirate sells the cargo far and wide and then ransoms back the ship.
The oil tanker is a big bite to chew for anybody, however. And there's no chance that the Somali pirates have the equipment to pump the oil out if its holding tanks. So they are going to be left with trying to collect a ransom without getting killed over it.
Posted by: scott clark at Nov 18, 2008 2:15:25 PM
We've had a free-market solution for darn near 225 year. Time to dust of the Congressional power to grant letters of marque and reprisal.
Posted by: Mitchell Young at Nov 18, 2008 2:53:53 PM
I agree with Bryan... I mean, isn't this kind of thing what firms like Blackwater get paid to take care of?
Posted by: Rex Rhino at Nov 18, 2008 3:43:50 PM
The last time National Geographic covered contemporary piracy, they concluded that most successful operations involve at least one inside man.
Private security might just be a better armed inside man.
Posted by: Cyrus at Nov 18, 2008 6:25:58 PM
Rex, I'd say this is what firms like the US Navy get paid to take care of. Why they aren't out there sinking the pirates is beyond me; the UN has already given us authority to pursue pirates into territorial waters and maritime law is well settled on the use of force against piracy.
Posted by: Alan at Nov 18, 2008 8:02:29 PM
Alan,
The U.S. Navy doesn't have the resources to be everywhere at all times. I most certainly would not have a problem with the U.S. Navy attacking pirates, but the ocean is big and ships are slow - Or do you expect the U.S. Navy to have a ship escorting each and every supertanker?
Cyrus,
There are different types of private security... Corporations already employ very trustworthy private security contractors all over the world. What is the difference between hiring mercenaries to protect your corporate VIP in South America, or some coltan mine in Africa, and hiring them to protect an oil tanker?
Posted by: Rex Rhino at Nov 18, 2008 11:10:15 PM
It sure seems like it could be reduced with an old aircraft carrier, some attack helicopters, and a spotter on client ships.
http://themaritime.files.wordpress.com/2008/08/pirates.png
The major piracy area isn't that geographically huge (although recent attacks have shown some expansion of their attack areas). A private security ship and 3 Huey/Cobras would mean a lot of sunk pirates. Then scoop up the survivors and ransom them back to the pirates or to the insurers. Piracy was solved a long time ago, using a very similar model.
Posted by: nelsonal at Nov 19, 2008 9:24:35 AM
"Unlike dry cargo ships the pirates will find it impossible to hide this carrier and it will be interesting to see how they plan to profit from the hijacking."
How about you pay me $10 million and I won't sink it?
Posted by: Tom at Nov 19, 2008 9:45:20 AM
The Indian navy has sinked two pirates already
Posted by: k at Nov 19, 2008 9:47:49 PM
* SOMALI PIRATES IN DISCUSSION TO ACQUIRE CITIBANK
HT kedrosky
Posted by: StreetWalker at Nov 22, 2008 12:59:16 AM
