Rational action is that which accounts for all the knowledge available, or at least that which would be relevant to the task at hand. Irrational would be to take information that is relevant to the problem and then to conclude falsely without relying on an informational error. Ignorance would be to conclude falsely because of an error in information. One thinks of adaptive expectations and limits to cognition when on things of ignorance.
So Leeson's work describes rationality which is found everywhere. Pirates are rational, the Roma are rational, Trials by ordeal are rational. Leeson is strictly right because he limits the definition of the group more than most people. This is a careful articulation of how the group functions. The pirates behave rationally given that they are on a boat together and are mostly outlaws. In a way Leeson shows that Pirates are more like Robin Hood than they are foaming at the mouth crazies. Contrast this with the way Pirates are typically considered (they destroy the peace as seen from the best interest of maritime travel). Leeson basically stakes his claims on the fact that groups are not ignorant of what it is in their best interest to be aware of, and therefore their behavior is rational (informed and maximizing subject to constraints).
How then would someone read Pirates as irrational. This is where I read Bryan Caplan into the mix. Caplan famously stakes a third category between rationality and ignorance. This category is called is irrationality. Caplan performs this trick by drawing a line between what is in the best interests of individual and what is actually chosen. If you ask the question about what is in the best interest of maritime travel, then you see the P-D game unraveling. The way that Caplan does this is to draw a contrast between what someone would chose privately, if they paid the full cost, and what someone would do publicly, when they free-ride. This standard welfare economics move shows that people will over-indulge when they pay too little cost. So then he says that irrationality is a good, like other goods. But what does irrationality literally buy you?
This is where I am reading into the debate. I start thinking about why someone would want to believe something irrational. Why might Unions believe that tariffs are a good idea (not only for them, but for the US)? Well the union has a position that they stake rationally for their own interest. Then they allow it to be argued as if it were in the interest of the nation. They must know that the interest of the whole nation is better served by lowering trade restrictions. So why might they consume this false or irrational argument despite the availability of very cheap information (so many economists are blogging now)?
I think that the real divide between rationality and irrationality is the demarcation of the group. When groups overlap and when individuals do not pay careful attention to the differences in membership between what North would call organizations (of which each individual is a member of several organizations at different sizes), then what looks like irrationality shows up. Leeson solves this by redefining the group to the point where the actions taken are rational (restricting the organization in question) -- rather than buying the fact that unions are actually arguing for the whole of the US he calls them out and says they are arguing for only the union itself. Caplan, on the other hand, seems to hold the question constant -- in my example, what is good for America. In doing this he allows for irrationality to persist by ignoring how groups define interest itself. This prevents the discussion from falling into a tautology.
I think you need both Leeson and Caplan to discuss the issue. Don't give up the question that is being asked, but consider how individuals define their own interests. Some back-and-forth between the two sides is needed to understand the problem.
