Want to Prevent Piracy? Privatize the Ocean by Peter T. Leeson

The article of the day comes from the National Review Online:

Following the freeing of American ship captain Richard Phillips from a band of Somali pirates Sunday, commentators have turned their attention to what can be done to control and prevent future piracy. The solutions suggested so far are what you might expect: Hit the Somali pirates at home with overwhelming force; reestablish “law and order” in Somalia so that pirates can’t flourish; and, closely-related, focus on state building in Somalia so citizens have lucrative employments other than piracy to turn to.

One suggestion that isn’t being considered, but should be, is to privatize the seas — especially those off Somalia’s coast. As the old adage (at least among economists) goes, “What nobody owns, nobody takes care of.” This is as true for oceans as it is for anything else. Piracy is just one manifestation of nobody taking care of what nobody owns when that “what” is the sea.

Governments exercise a kind of de facto ownership over the waters off their coasts; states have jurisdiction over, and thus control, what goes on in within so many miles of their shores. But there’s no government in Somalia to control what goes in Somalia’s would-be territorial waters. And in any event, pirates have taken to plying their trade 200-plus miles off the coast — watery territories nobody owns.

Predictably, the absence of ownership of these waters means no one has had much incentive to prevent activities that destroy their value — activities such as piracy. The result is a kind of oceanic “tragedy of the commons” whereby, since no one has an incentive to devote the resources required to prevent piracy, piracy flourishes. In contrast, if these waters were privately owned, the owner would have a strong incentive to maximize the waters’ value since he would profit by doing so. That would mean suppressing and preventing pirates.

Rather than trying its hand at Somali state building, the international community should try auctioning off Somali’s coastal waters. According to some Somali pirates, greedy foreign corporations are exploiting valuable resources in these waters, which is allegedly why they’ve resorted to piracy (the large ransoms earned from pirating are a happy but unexpected byproduct of pursuing social justice, I suppose). If this is right, Somalia’s coastal waters should be able to fetch a handsome price. The international community can use the proceeds of the auction for humanitarian assistance in Somalia, or put it in a trust for Somalia’s future government, if one ever emerges. The “high seas” should be similarly sold. It’s not so important where the proceeds go. The important thing is that the un-owned becomes owned.

Establishing private property rights where they don’t currently exist is the solution to about 90 percent of world’s economic problems. Piracy is no exception.

Published in: on April 15, 2009 at 6:21 pm  Leave a Comment  
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