Organization and incentives in the age of sail q Daniel K. Benjamin a, * , Christopher Thornberg b a Clemson University and PERC, USA b University of California, Los Angeles, USA Received 6 July 2005 Available online 5 June 2006 Abstract The British Navy in the age of sail was the most successful bureaucracy of its time. Its organization and incentive structures differed importantly from contemporaneous private sailing ventures, but close- ly resembled those of today’s large corporations. To induce efficient effort, the navy used a hierarchical tournament, in which sailors competed for higher pay that came with promotions based on relative per- formance. Promotion probabilities, the option value of future promotions, and the higher effort required of men in higher ranks and on larger vessels, combined to yield a highly skewed pay structure. Ó 2006 Elsevier Inc. All rights reserved. Keywords: Tournament; Hierarchy; Promotion; Military; War; Prize; British navy; Wages; Sail; Privateer ‘‘These (petty officer positions) are confidential situations, nor is any king’s ship per- fectly safe if all of these offices be not filled by real practical seamen, well affected, and desirous of continuing in, and attaining promotion in the navy.’’ Sir Phillip Patton, Admiral of the White, 1810. 0014-4983/$ - see front matter Ó 2006 Elsevier Inc. All rights reserved. doi:10.1016/j.eeh.2006.04.001 q Support from the Earhart Foundation, the Arthur M. Spiro Center for Entrepreneurial Leadership at Clemson University, Cardiff University, and the British National Maritime Museum is gratefully acknowledged. Stanley Engerman, Roger Knight, Brian Lavery, Deirdre McCloskey, N.A.M. Rodger, Curtis Simon, Carl Swanson, Robert Tamura, John Warner, and workshop members at Clemson, UCLA, Northwestern, Georgia, Cal Tech, Rutgers, Colorado, North Carolina-Chapel Hill, Cardiff, and Greenwich offered many helpful suggestions. We are grateful for the assistance of Roger E. Nixon, Dendy Macaulay, and the staffs of the British National Archives and the British National Maritime Museum. Special thanks to Patrick Minford. * Corresponding author. Fax: +1 864 656 4192. E-mail address: wahoo@clemson.edu (D.K. Benjamin). Explorations in Economic History 44 (2007) 317–341 www.elsevier.com/locate/eeh Explorations in Economic History