Pay Grades in the Extralegal Sector

In Peter Leeson's new book, The Invisible Hook, Leeson notes the pay grade was quite flat (pirate captains were paid twice as much as the lowest member of the crew, compared to merchant captains of that same era which were paid five or six times as much). He argues it's to encourage solidarity, discouraging envy and encouraging unanimous approval to continue on their plundering ways (a skewed system would encourage those at the top to stop and those at the bottom to keep going, thus creating tension).

But the same could be said of drug dealers, who have a very skewed pay scale. As Steven Levitt and Stephen Dubner note, the top drug dealers earns about 100 times that of the lowest earner. But gangs of this sort don't show the lack of harmony or disloyalty that should be plagued by Leeson's explanation. So how do we reconcile these two different worlds?

The key difference between a pirate ship and a drug-dealing gang is the level of entanglement with their surroundings. A pirate ship is basically a floating island and because it's so isolated, it's relatively easy for anyone to see how the game is played. A gang, on the other hand, is entangled with the larger surroundings. There's a lot of activity members don't see and many critical relations with those outside the gang that most don't have. In other words, the lowly sailor is a closer substitute to his captain than a lowly drug dealer is to his top boss. While a rebellious sailor might be able to handle captaining competently, a rebellious drug dealer would likely not have the same level of success. This also explains why pirates elected their captain while dealers autocratically promote from below (thus why the higher ups are paid so much: to encourage lower ranks to work harder on the chance they can be promoted).