Kurt Bouwhuis, Mackinac Center Intern
Peter Leeson, professor at George Mason University, has conducted extensive research on pirates revealing some very interesting economic insights. He recently published a new book on this very topic, titled The Invisible Hook.
I was recently reading through one of his papers, titled Trading with Bandits, where he presents an interesting dilemma faced by traders in Africa. In the early to mid 1800′s, in upper Zambezi and Kasai, there existed settlers along the Angolan coast. The settlers employed middlemen who were hired to trade and transport goods from the interior communities. The interior communities were made up of many small tribes with no government oversight – only various tribal leaders who enforced informal rules.
The interior communities generally harvested ivory, beeswax, and wild rubber for trade. The middlemen brought tobacco, gin, beads, shells, and brass, which were used as body ornaments, cloth, and firearms. The middlemen were the sole suppliers of firearms to interior communities, which created a large incentive for plunder. The interior communities were presented with a limited number of guns in trade, in order to create a large imbalance in weapons. Within a short time, the middlemen began to resort to plunder, choosing to steal rather than trade. This leaves us with an interesting question:
Is the market capable of dissolving violence and addressing imbalances in power, or does the government need to step in? In tomorrows blog post, I will reveal the answer to this question.