An Economic Model of Maritime Piracy: Part 2, Optimal Enforcement of Anti-piracy Laws

Given the optimal behavior of pirates and victims described in Chapter 4, this chapter examines the optimal enforcement of anti-piracy laws. This involves choosing the probability of apprehension and the sanction to maximize the net value of shipping. In the case where there exists a single enforcer with both the will and the resources to carry out the optimal policy, the standard conclusions from the economics of crime literature apply. Specifically, the sanction is ‘maximal’ and the probability of apprehension equates the last dollar spent on enforcement to the marginal benefit of deterrence. Actual enforcement policies, however, fall short of this ideal for several reasons: first, law enforcement is a public good and so individual countries are likely to underinvest in effort; second, the cost of prosecuting and punishing pirates is very high; and third, even if countries have the will to impose punishment, they may differ in their interpretation of what constitutes an appropriate sanction.