economics of piracy

economic cost: piracy’s global financial damage is in the range of USD 7 – 12 billion

  • “in somalia, the economic model for piracy is working well. in 2010, the US, EU and the UK gave the country a combined $298m in aid – less than half the sum pocketed by the pirates when light aircraft dropped waterproof containers full of cash into the waters near their beach settlements.” (here.)

economic strategy, should you be kidnapped:

  • first, this is likely (should you be off the cost of the horn of africa), as piracy now, like piracy in antiquity but less like the early modern period, is largely about kidnapping
  • negotiators should seem willing to walk away
  • do not reveal that you have kidnapper’s insurance (or other info about capacity to pay)
  • the going ransom rate is not relevant to your bargaining situation
  • “when the hostage’s party is negotiating a ransom with pirates both the pirates and hostages may be behaving in ways that are ultimately consistent with a game of chicken under conditions of bounded rationality and bayesian inference about asymmetric information, but in the immediate subjective sense they may simply be feeling that the recent run of ransoms sets an expectation of what it is fair to pay for this particular hostage”
  • (among other things, “maybe Mogadishu University needs a better econ department”)

Published by hlanthorn

ORCID ID: 0000-0002-1899-4790

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