The case of the serial sinking Spanish ships | Planet Money

Intro

In this episode of the “Planet Money” podcast, titled “The case of the serial sinking Spanish ships,” the hosts explore a maritime mystery related to a valuable shipping route between Mexico and the Philippines in the 1500s. Economists Fernando Arteaga and Mark Kojama discuss their research paper that unravels the mystery of why Spanish ships had a high rate of wrecking. The episode delves into the impact of the shipping route on Spanish merchants, the Spanish crown, and the risks associated with overloading the ships.

Main Takeaways

The Mystery of the Serial Sinking Spanish Ships

• The Spanish Empire ran a valuable shipping route in the 1500s between Mexico and the Philippines, carrying silver, fancy porcelain, and textiles.
• Ships had a high rate of wrecking, with one in five ships leaving from Manila not making it to Acapulco.
• The mystery of why the ships were wrecking remained unsolved for centuries until clever economists found a way to identify the culprit.

The Tale of Econ 101 Ideas Gone Wrong

• The story is divided into four chapters and set in the 1500s during the start of modern globalization, focusing on Spanish ships running between Manila and Acapulco.
• Suspects for the shipwrecks included pirates, war, and bad weather.
• Data on pirates was found in ship logs, but they were not the main cause of the shipwrecks.
• War between the British and Spanish Empires correlated with a higher probability of shipwrecks, but not enough to account for the high rate.
• The most significant cause of shipwrecks was ships leaving too late and sailing into monsoon season, which was the best predictor of a shipwreck.

The Role of Corruption and Overloading

• Protectionist trade policy restricted the Manila Galleon route to just one ship per year, benefiting domestic merchants but causing unintended consequences in Manila.
• The marginal benefit for merchants to get their goods on the limited ship was significant, leading to them offering bribes to the captain to delay the ship and overload it with extra cargo.
• Bribery is debated as a way of allocating goods efficiently but can lead to inefficiency and increased shipwrecks.
• Captain’s decisions influenced by large bribes, turning voyages into a lottery ticket with the potential for huge financial gain.

The Impact and Lessons Learned

• The high rate of shipwrecks in the Philippines was not solely due to typhoons.
• The episode explores the economic impact of bribery and corruption on shipwrecks.
• Aligned incentives collectively to avoid shipwrecks, but different risk calculations led to individual decisions causing shipwrecks.
• A captain sees a 1 in 5 chance of shipwreck as a 4 in 5 chance of not shipwrecking and never having to work again, highlighting the importance of perspective and risk assessment.

Summary

The Mystery of the Serial Sinking Spanish Ships

In the 1500s, the Spanish Empire operated a lucrative shipping route between Mexico and the Philippines, transporting valuable goods such as silver, porcelain, and textiles. However, one in five ships leaving from Manila never made it to Acapulco, leaving a mystery unsolved for centuries. Economists Fernando Arteaga and Mark Kojama delve into this mystery and uncover the main cause of the high shipwreck rate.

The Tale of Econ 101 Ideas Gone Wrong

The investigation into the shipwrecks reveals that pirates and war were not the primary culprits. Instead, the best predictor of a shipwreck was ships leaving too late and sailing into monsoon season. This revelation challenges conventional wisdom and highlights the importance of considering all factors when analyzing economic phenomena.

The Role of Corruption and Overloading

Protectionist trade policies limiting the Manila Galleon route to one ship per year created a high demand for limited cargo space. Merchants, eager to secure a spot on the ship, resorted to bribery to delay departures and overload the ships with extra cargo. This corruption and overloading significantly increased the risk of shipwrecks, leading to economic losses and the downfall of the Manila galleon shipping route.

The Impact and Lessons Learned

The research paper sheds light on the economic impact of bribery and corruption on shipwrecks. It highlights the importance of aligned incentives and collective efforts to avoid shipwrecks, while also emphasizing how individual risk calculations can lead to disastrous outcomes. The episode serves as a reminder of the significance of perspective and risk assessment in decision-making.

Conclusion

The case of the serial sinking Spanish ships unveils the complex web of factors that contributed to the high shipwreck rate in the 1500s. It showcases the unintended consequences of protectionist trade policies, the allure of bribery, and the importance of considering all variables in economic analysis. By unraveling this maritime mystery, economists provide valuable insights into the interplay between corruption, risk assessment, and collective decision-making.