Bring Back the Privateers!

Senator Mike Lee has a new bill that encourages the President to authorize letters of marque and reprisal against drug cartels:

The President of the United States is authorized and requested to commission, under officially issued letters of marque and reprisal, so many of privately armed and equipped persons and entities as, in the judgment of the President, the service may require, with suitable instructions to the leaders thereof, to employ all means reasonably necessary to seize outside the geographic boundaries of the United States and its territories the person and property of any individual who the President determines is a member of a cartel, a member of a cartel-linked organization, or a conspirator associated with a cartel or a cartel-linked organization, who is responsible for an act of aggression against the United States.

SECURITY BONDS.—No letter of marque and reprisal shall be issued by the President without requiring the posting of a security bond in such amount as the President shall determine is sufficient to ensure that the letter be executed according to the terms and conditions thereof.

My paper on privateers explains how privateers were historically very successful. During the War of 1812, roughly 500 privateers operated alongside a tiny U.S. Navy. The market responded swiftly—privateers like the Comet were commissioned within days of war’s declaration and began capturing prizes within weeks. Sophisticated institutional design combined combined profit incentives with regulatory constraints:

• Security bonds ensured compliance with license terms
• Detailed instructions protected neutral vessels and required civilized conduct
• Prize courts adjudicated captures and distinguished privateers from pirates
• Share-based compensation created good incentives for crews
• Markets emerged where crew could sell shares forward (with limits to maintain work incentives)

Privateers cost the government essentially nothing compared to building and maintaining a navy. Private investors financed vessels , bore the risks, and operated on profit-seeking principles. Moreover, privateers unlike Navy vessels had incentives to capture enemy ships, particularly merchant ships, not just blow them and their occupants out of the water. Of course, capturing the drugs isn’t very useful but it’s quite possible to go after the money on the return journey–privateers as hackers–which is just as good.

Here is my paper on privateering, here is the time I went bounty hunting in Baltimore, here is work on the closely related issue of whistleblowing rewards and here is the excellent historian Mark Knopfler on privateering: