Murder Hobos and the Economics of Piracy

The Local Smugglers

The local magistrate requests the Murder Hobos visit his office.

In Medieval societies, while armies grow to great sizes, civic law enforcement is thin on the ground.  Paying and training a useful and functional standing police force is an expensive proposition in gold, time and 0-level NPC farmer peasants.  Local governments must make the tradeoff between safety and food.  Therefore, municipal Medieval governments resort to recruiting local, scruffy-looking, and somewhat drunk mercenaries (and cutting in the local Questgivers Guild) to deal with their thornier criminal problems via a judicious application of ultra-violence.

The problem, in this case, is smuggling.  The Thieves’ Guild moved in and took over the town’s peaceful peasant docks.  It’s become a full-scale thing at night and the local magistrate’s higher-up, the Earl, caught wind of the problem. He’s not happy and the local police are struggling. Can the Murder Hobos search for the thieves’ lair, defeat the smugglers in an epic battle, and keep whatever treasure they roll off the bodies?

The Murder Hobos go: thumb’s up, buddy.

And sure enough, the Murder Hobos find thieves on the docks smuggling enormous crates of something off ships in the cover of night.  They track the smuggling operation to a surprisingly healthy black market.  There, they find the Thieves’ Guild ring-leaders and bosses doing business.  The Murder Hobos commit all kinds of XP-bearing state-sanctioned murder.

This pleases the local magistrate.   He writes a few recommendation letters.

The King himself, going over his Earl’s head, summons the Murder Hobos to his Court.  He’s quite happy with the Murder Hobos’ work with the smugglers and the black market.  In reward, he offers the Murder Hobos royal papers and a ship.  The King says, taking out the smugglers was right and good, but now the Murder Hobos must chase the bigger fish.  The Murder Hobos must take out their pirate suppliers – who might be in the pay (or military) of foreign governments.

In the name of the Kingdom, says the King, the Murder Hobos can hunt pirates, engage them in combat, kill them, take their stuff, and sink their renegade ships to a watery grave!  The Murder Hobos can keep all treasure and XP they gain except for a certain, small, trifling percentage back to the Crown.

The Murder Hobos say: sure! High Seas adventure sounds awesome!

After the meeting with the King, the party’s warlock and handy, adventuring economist, says: Wait a minute.

Basic Pirate Market Speculation

Piracy is simply another form of market speculation, albeit an extremely violent one.  When making the choice to raid a ship, or even become pirates at all, the would-be pirates make a conscious risk-reward calculation.  The first tier of decision-making works something like this:

• Never stealing a ship and declaring oneself a pirate is a valid and rational choice if the reward for high-seas thievery is very low. If nothing shipping is worth stealing or the risks involved are so high the reward is not worth that risk, the seas stay free of pirates.
• But, if the rewards outweigh the risks, pirates!  Pirate Captains make cold calculations before risking their precious resources of ship, weapons, magic, and men against the possible rewards of a good payout. Is the cargos worth it?  Will naval forces catch the pirates mid-pirating?  Is the ship they are eyeing armed?  All valid questions which temper risks versus rewards before heaving ho.
• In fact, if the rewards for piracy are enormous and the risk non-existent, governments get in on the piracy party – especially if high seas raiding gives heartburn to rival governments. Cash-strapped governments on constant war-footing, seeing a good investment opportunity, speculate with their tax base on state-sponsored sea-based theft.  They authorize local mercenaries in their names and papers to commit high-seas piracy on their rivals and return a percentage cut of cargo sold back to the Crown. These profits (a higher % return than inflation) return back to the treasury to pay for more land-based wars.

Since Medieval societies must make constant food-vs-safety choices to allocate their few resources efficiently, the risk of sudden market failure (ie, a heavily armed and angry military ship capturing and killing pirates) is low, our economist warlock says.   The kingdom lacks the coordinated naval resources to stop piracy whole-scale with brutal violence.  But, are the rewards worth it?  Economics is the study of scarcity in markets and when a good is scarce, the price rises accordingly.  Something is scarce and therefore worth the risk.  Pirates will not raid the high seas if they know merchants filled their holds of ships with packing peanuts.

Pirates weigh these possible factors before going about their pirating:

1. Is the spotted ship worth taking over?  A small skiff is unlikely to hold anything of interest. The enormous 100 gun military vessel is tasty but heavily armed. The sailing merchantman is the sweet spot – not too armed, but with enough payout to cover any losses, carry reasonable cargo, and make a profit.
2. Will the pirates get caught mid-pirating or post-pirating by armed law enforcement?  If so, that could go bad.
3. Is the possible, unseen cargo in the merchantman worth possible traps, death, mayhem, and law enforcement?
4. And, is there a buyer for that unseen mystery cargo?

The fourth question is the important question to ask.  Every single take-over of a cargo-bearing ship is an extra market risk – the risks of law enforcement, of the ship carrying Murder Hobos, of bad cargo.  It’s like opening a present.  It might be something good.  It might be something bad.  For all the pirates know, that merchantman is carrying either gold or Gnomes.  Without careful application of magic – and here is where wizards ought to get involved, the economist warlock says – pirates take an investment gamble of time and resources on every attack.

The pirates are weighing probabilities, the economist warlock says.  Knowing organized land-based buyers exist – ie, smugglers, black markets and customers – pirates are safely assuming something worthwhile floats in the holds of those round-bottom ships. Something people will pay for.

Clearly, between scarcity, low Naval policing presence, and eager buyers, the King has a piracy problem along his shore.  He is offering successful Murder Hobos Letters of Marque to take the fight to the seas.

The question is: Why?

Creating a Market

During times of war and famine, local, noble-blooded landowners raise the price of wheat.  It’s scarce, price finds a way, and the price rises with demand.  The local landowners also force the their 0-level NPC bonded peasants, who grow the wheat, to sell a maximal amount of their wheat to the market for the maximum market profit.  Scarcity is an awful time for the local people but a bonanza profit fountain for those at the top.  Terrible thing about the peasants having to eat their shoe leather, the Earls and Dukes say at their huge banquets.   We hope the famine breaks soon and we win the war.

While Medieval societies are closed and self-sufficient, as populations grow, societies bump into one another.  One society might have starving peasants yet diamond mines for resurrection while the other has a bumper crop and a burgeoning magic item industry.  So, they trade with each other.  You give me food and I’ll give you diamonds. But trade also re-allocates resources in an economy and removes scarcity from core production products like cloth or food.  These traded products become cheap commodities.

Governments pass laws to protect what little supplies they have to feed their peasants when supplies are low. After all, if the peasants all die, high profits or not, the rich won’t have anything to eat.  They keep peasants around to make the food.  But, then when the crisis passes, those laws hang around.  High tariffs and protectionism lingers.  Laws keep prices high.  Those in charge won’t lower their tariff walls and allow foreign food to flow in and put downward pressure on their markets.  They like money.

High tariffs and protectionism walls create opportunities for those who take the risks to reap the rewards.  In this case, the Kingdom’s Earls and Dukes pressured the King to keep high tariff walls around the import of foreign wheat after the last spat of “unpleasantness” ended.   The Kingdom experienced a wheat shortage due to bad harvest during the last round of wars with their neighbor. During the altercation, the nobles reaped fat profits off the backs of the peasant and merchant population.  While the harvests are now healthy, wheat’s price is still high.

Now, pirates, seeing a lucrative speculative opening in wheat futures, are jumping foreign ships, stealing cargo, and dumping cheap foreign wheat on the docks into the hands of smugglers.  The smugglers sell the wheat at high but still lower-than-controlled government market prices in black markets to the local populations.  The local populations gets to eat.   Money flows into the hands of pirates instead of nobles.  The nobles become super irate.

And the Kingdom says:

• First off, we need to get rid of these freebooters because they’re cutting into our bottom line;
• Second, perhaps the Kingdom can take a cut of selling this extra foreign wheat by exploiting its own tariff and protectionism laws;
• Third, we get to hassle our enemy, the foreign government.
• Fourth, not a 0-level NPC peasant wins!

Thus and therefore, Murder Hobos now have in their hands a license to take a ship, go raid the high seas and rid the oceans of pirates in the name of the Kingdom.  And high profits.

Pirates Have No Allegiance to Anyone

The Murder Hobos learn, while they’re off privateering, that each pirate ship is its own self-contained company in a highly competitive free and laissez-faire market.  Pirates are individual, freelancing contractors who stand up their corporate concerns in this open, free market of speculation and food futures.   Even those pirates with Letters of Marque in their pockets and tacit permission from their governments to create mayhem have no true allegiance to anyone except themselves.  The market ensures everyone is an untrustworthy scoundrel.

The market offers both enormous rewards in treasure and XP and death. Perfect for the Murder Hobo on the go.

The warlock economist points out:

These pirates are competing over the same fixed pool of rewards.  Pirate ship concerns (ie, actual physical pirates) will multiply and fill the ocean while risk remains low and reward remains high providing ample opportunities to level up.  However, as pirates continue to enter the market, pirate ship numbers will reach an equilibrium when the risk to reward balance becomes near even and profit dries up.  Killing pirates keeps this point further in the future but the allure will continue to draw perfectly good naval crews into lives of piracy.

At the equilibrium point, it becomes to everyone’s benefit – the pirates, the Murder Hobos, the governments wanting a cut – to push over the balance so the risk and reward moves from the fat, tasty merchantmen to the pirates themselves with their loads of fat cargo and pirate treasure.  Then, pirate war breaks out. Strong pirate companies will eliminate weaker pirate private contractors.  Pirates continue murdering other pirates until the market clears of competition and profit margins again rise.  Rinse, repeat.

We can use pirates to kill pirates, the warlock economist says, by making more pirates.  Pirates will prey on each other and kill off the weak to up their own rewards.  This leaves only the richest behind for Murder Hobo consumption.

We need to create more pirates.

The warlock economist looks at the King’s Letters of Marque. She points out to the rest of her Murder Hobo crew another way to optimize their mission: corporate mergers.  Take over ships and, instead of murdering the crew and taking their stuff as is the Murder Hobo way, force them to join a flag.  Scale their corporate investment out horizontally.  One ship can capture a certain amount of wheat and/or other pirates.  Ten ships can capture ten ships worth of cargo back to haul to shore for profit.  Scaling out lowers their pirate market risk while keeping their profits high.  Losing one ship to an unfortunate merchantman trap is no longer a company-ending event.   This builds an allure for more to go into piracy (thus making more pirates) and lowers our risk.

The Murder Hobos will be corporate officers and cut their own personal exposure to speculative market risk while their pirates take the brunt of their charge by, well, pirating. And what pirates wouldn’t want to join up?  After all, the Murder Hobos are famous heroes with magic spells and weapons. They pose a clear market advantage over normal, scruffy Pirate Captains.

That way, the warlock economist says, other strong pirate ships will force weaker pirates to join their flag to compete in this new market.  The pirates will go corporate to maximize the pirate effort.  And next thing we know, we will have not only enormous profits but exciting and climatic multi-ship mega-battles on the high seas.  Thus eliminating the pirate threat.

The Murder Hobos will simply corner the piracy market.

The Paladin, of course, objects to abusing their King’s Letters of Marque like this.  That’s why the rest of the party leaves him on an island.

A year later, the Murder Hobos retire from their life of state-sponsored high seas terrorism rich as Lords.  They leave behind their legends as Pirate Kings built on a loose yet massive amalgamated confederation of pirates and wheat.  They built their Pirate Isle to store their reaped gold and magic.  Perhaps the mission wasn’t carried out to spec but the Murder Hobos had lots of high seas fun.

The pirates aren’t destroyed.  This scheme just makes more pirates.  No amount of military force will kill speculators in an open market when speculation is possible. Speculation, like life, finds a way.  The pirates prey on merchantmen and, then, when there are too many pirates, each other.  The cycle continues with or without Murder Hobos.

The pirates finally disperse when the King lowers his wheat tariffs, signs a treaty with his rival foreign government, and wheat prices drop dramatically.   Without the easy, fast, low risk, high reward profits of wheat, pirates don’t exist.   Profit and danger-seekers go elsewhere – like turn ex-pirates into more Murder Hobos waiting in taverns for Questgivers to send them off to destroy smugglers on the docks.   Something new is coming into town on the black market…

Meanwhile, the warlock economist returns to whatever strange land she came from and presents her research findings to her Patron.  Her Patron approves, and allows her to publish her paper but makes some droll commentary about her new hat.

Writer’s Note: No post next week due to Gencon.

Image Credit: Art by Jaydot Sloane of Vanity Games – http://www.patreon.com/VanityGames