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Maritime Piracy and its Control develops an economic approach to the problem of modern-day maritime piracy with the goal of assessing the effectiveness of remedies aimed at reducing the incidence of piracy.



1. The Scope of the Problem: History, Trends, and Current Facts

Chapter 1 reviews the nature of modern-day maritime piracy by offering data on the incidence and type of attacks in recent years. It also offers estimates of the cost of piracy, which ranges between $1 billion and $16 billion per year. Finally, the chapter previews the content of the remaining chapters in the book.
C. Paul Hallwood, Thomas J. Miceli

2. Pirate Organization: Yesterday and Today

Chapter 2 discusses the organization of piracy in both its historical and modern-day versions based on the idea that the more efficient a pirate organization is, the more effectively it will carry out its objectives. Leeson (2007a) argues that pirates during the Golden Age (ca. 1690–1730) developed sophisticated mechanisms aimed at achieving their goal of maximizing the value of their plunder. These mechanisms included democratically elected captains, who therefore were answerable to the crew, and pirate constitutions that explicitly specified the duties and obligations of crew members. In contrast to their earlier brethren, modern-day pirates rely more on landward bases, from which they launch their attacks and to which they return for protection from local clans. Empirical evidence supports the hypothesis that those ports along the Somali coast that harbor pirates tend to be ones that are less successful in fostering legitimate trade.
C. Paul Hallwood, Thomas J. Miceli

3. Somali Piracy: For the Money or for the Honor?

This chapter examines the motivations of Somali pirates using an economic model of job selection. We specifically examine the question of whether the main motivation of modern-day pirates is specifically monetary gain or the larger goal of protecting Somalia’s national interests from over-fishing and other unfair practices by foreign governments, as some have asserted. Simple calculations suggest that monetary gains constitute sufficient motivation for most Somalis, given the high return piracy promises relative to legal employment, coupled with the low expected cost of sanctions.
C. Paul Hallwood, Thomas J. Miceli

4. An Economic Model of Maritime Piracy: Part 1, Pirates and Shippers

This chapter develops an economic model that examines the behavior of pirates and their potential victims (shippers) in the presence of a fixed enforcement policy. In other words, taking the expected sanction as given, we derive the optimal effort of pirates to locate and attack potential targets and of targets to avoid contact and attack. We then examine how exogenous changes in the expected sanction affect the equilibrium level of offensive efforts by pirates and defensive efforts by shippers. The results show that greater third-party enforcement will generally reduce pirate effort but will also tend to ‘crowd out’ defensive efforts by shippers. In this sense, public enforcement and self-enforcement are substitutes. An alternative response to piracy by shippers when confiscation of cargo is the risk is to adjust the cargo to make it unattractive to pirates. We show that, in contrast to self-defense, this type of ‘self-insurance’ by shippers is complementary to third-party enforcement.
C. Paul Hallwood, Thomas J. Miceli

5. 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.
C. Paul Hallwood, Thomas J. Miceli

6. Reform Proposals: Part 1, Apply the SUA Convention to Piracy

This chapter examines the proposed application of the prevailing international law regarding maritime terrorism, as embodied in the SUA Convention, to maritime piracy. The main advantage of this Convention over the Convention on the Law of the Sea, which is the basis in international law for prosecuting acts of piracy, is that the SUA Convention contains features that would substantially increase international enforcement efforts. Among other things, these include a requirement for signatory nations to extradite and prosecute offenders, something that the Law of the Sea does not currently require. It appears that the main impediment to the application of the SUA Convention to piracy is its stated intent of addressing terrorism specifically, which apparently is perceived as a more serious threat than piracy.
C. Paul Hallwood, Thomas J. Miceli

7. Reform Proposals: Part 2, Apply Civil Aviation Laws to Piracy and Use the International Criminal Court to Try Pirates

This chapter discusses two further reform proposals: first, to apply the principles embodied in international laws regarding ‘air-terrorism’ to the problem of piracy, and second, to use the International Criminal Court (ICC) to try pirates. As with the application of the SUA Convention, application of air-terrorism laws to piracy would substantially improve enforcement efforts compared to the Law of the Sea. Likewise, use of the ICC to try pirates, it is argued, would reduce the incentives of nations that apprehend pirates to release them in anticipation of the high cost of prosecuting them at home. The reason is that the cost of prosecuting pirates in the ICC could more easily be shared by all countries, thereby reducing the incentives for ‘capture and release.’
C. Paul Hallwood, Thomas J. Miceli

8. Piracy in the Golden Age, 1690–1730: Lessons for Today

This chapter reviews the history of the so-called Golden Age of piracy, which lasted from ca. 1690 to 1730 and occurred primarily in the North Atlantic Ocean and Caribbean Seas. Many pirates during this time had previously been commissioned as privateers or agents of national governments charged with attacking and plundering the merchant ships of enemy countries, thereby blurring the line between piracy and warfare. When hostilities ceased, however, many privateers continued their activities as outright pirates. An important lesson from the Golden Age is that national enforcement efforts seem to have been quite effective in ending the threat. We contend that this is because international trade at the time was monopolized by England and France, and so enforcement had more of the character of a private good than a public good. Also, accepted law enforcement practices at the time allowed harsher and speedier punishment of pirates as compared to today.
C. Paul Hallwood, Thomas J. Miceli

9. Conclusion: The Mystery of International Legal Obligation

This chapter investigates the nature of International Public Law (IPL) and asks why it continues to permit certain types of lawless behavior like maritime piracy to persist. The proposed answer is that IPL is to a large extent voluntary in the sense that countries can choose whether or not to enforce it, and there is little consequence of choosing not to do so. The extent to which some enforcement does occur is because countries like the United States have a sufficiently large stake in maintaining order that they will unilaterally expend the necessary resources, while other countries will be content to free-ride on those efforts. At present, this appears to be the case with regard to the control of maritime piracy.
C. Paul Hallwood, Thomas J. Miceli


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