Cheaper –And Safer– Without Guards

by Patrick Appel

Peter Leeson, who has a new book out on piracy, explains that putting guards on commercial ships could increase deaths and costs:

Armed guards will of course defend against pirate attacks, potentially leading to fire fights that could jeopardize innocent sailors’ lives. The prospect of having to battle for their prizes will deter some pirates. But others will remain undeterred. And for the remaining industry, armed guards’ effect may very well be to increase the dangers that piracy poses rather than reducing them.

The profit-driven behavior of commercial shippers corroborates this possibility. Like pirates, commercial shippers also have strong incentives to keep merchant sailors alive and well: insurance costs. If armed guards reduced the dangers of piracy instead of increasing them, commercial shippers’ insurance costs would fall by employing guards instead of rising. But in this case commercial shippers would have hired armed guards already, which they haven’t. Commercial shippers don’t need government to encourage them to undertake the most profitable course of action.