Economic approach to maritime piracy

An economic approach to the control of maritime piracy is based on the general economic theory of law enforcement

Economic approach to maritime piracy

An economic approach to the control of maritime piracy is based on the general economic theory of law enforcement that views offenders (pirates) as rational decision makers who would respond to threatened punishments.

Implementation of optimal enforcement policies is impeded by lack of cooperation in the apprehension and prosecution of pirates as a result of free rider problems. In this sense, controlling maritime piracy is subject to similar problems as the prosecution of the global war on terror and the anti-drug war.

The overall economic cost of maritime piracy in 2012 was estimated at $6 billion, down from $7 billion the year before and as much as $16 billion a few years earlier. Spending on on-board security equipment and armed guards increased from about $1 billion to $2 billion between 2011 and 2012. Other economic costs include additional travel days as a consequence of re-routing of ships; increased insurance costs of as much as $20,000 per trip; increased charter rates, as longer time at sea reduces the availability of tankers; the cost of faster steaming through pirate-affected seas; and greater inventory financing costs for cargoes that remain longer at sea.

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Source: infomarine.net