In my new Reason Magazine column I look at the economics of piracy. A solution:
In an ideal world, we would leave protection up to the owner of the water in question. But today no one really owns the waters where pirates operate. And if no one owns them, no one protects them. Usually governments exercise an implicit ownership of the waters off their coast, but the absence of credible government in Somalia bars that possibility. What’s more, today’s pirates also operate far from any coasts, in water that nobody claims.
If possible, it would be productive to find ways to privatize those pirate-infested seas. There are obvious difficulties, though not insurmountable ones, in the Somali case, where there’s no central government capable of conducting an auction. The alternative, a bottom-up homesteading approach, might end up granting the waters to the pirates themselves, but the best way to pacify the pirates may be to allow them formal ownership rights. In the long run, privately controlled waters would generate new solutions to the piracy problems. Former pirates, for example, could serve as escorts to commercial ships, not unlike the way retired hackers often emerge as computer security consultants.
No matter what solution emerges, shipping companies, not taxpayers, would bear the costs of their own protection. That in itself is enough reason to start thinking creatively about privatization.
The whole thing here.