Who's Counting: Sexonomics -- Prostitutes' Incomes

The best-selling book "Freakonomics" examines the economics of some ordinary life situations. If these situations involve sex, the analysis might be better termed Sexonomics.

One of the first practitioners of sexonomics was Nobel Prize-winning economist Gary Becker, whose 1970s paper "A Theory of Marriage" pushed the economic analysis of sex into the purview of his fellow economists.

More recently, two other economists, Lena Edlund of Columbia University and Evelyn Korn of Eberhard-Karls-Universitat Tubingen, have published an intriguing paper, "A Theory of Prostitution," (link: http://www.iies.su.se/seminars/papers/Edlund.pdf) in the Journal of Political Economy.

Making simplistic but more or less plausible assumptions and applying the tools of economic model-making, they searched for the answer to a puzzle: Why is it that prostitution is so relatively well-paid?

Before getting to why this is, they document that in diverse cultures and over many centuries, prostitutes have indeed made much more, sometimes several multiples more, than comparably (un)skilled women would make in more prosaic occupations. From medieval France and imperial Japan to present-day Los Angeles and Buddhist Thailand, this income differential has persisted, although its size depends on various factors.

(That prostitutes generally make considerably more money than their skills would warrant may be obscured by biased sampling. Studies of prostitutes often survey those in trouble with the law or on drugs and hence not earning what they might. By analogy, if studies of marriage were frequently conducted at shelters for battered wives, people would probably soon develop a more jaundiced view of marriage as well.)

Prostitution Diminishes Marriage Chances

Developing the consequences of their mathematical model, Edlund and Korn argue that the primary reason for the income differential is not the risk sometimes associated with the practice of prostitution but rather that prostitutes greatly diminish their chances for marriage by virtue of their occupation. Men generally don't want to marry (ex)prostitutes, and so women must be relatively well-compensated in order to forgo the opportunity to marry.

Employing market concepts, doing some calculus and assuming that "women sell and men buy," the authors also conclude that prostitution generally declines as men's incomes increase.

Wives and prostitutes are competing "commodities" (in the reductionist view of economists, that is), but wives are distinctly superior in that they can produce children that are socially recognized as coming from the father.

Thus, if men have more money, they tend to buy the superior good and, at least when wives and prostitutes come from the same pool of women, tend to buy (rent) the cheaper good less frequently.

More obvious perhaps is that prostitution generally declines in areas where women's incomes and opportunities are greater.

Putting these two tendencies together suggests that if one wishes to reduce prostitution, increasing the incomes of both men and women is likely to be more effective than imposing legal penalties.

Sex Ratios, Foreign Prostitutes and Cultural Factors

Another consequence of the authors' model is that a high ratio of men to women tends to increase prostitution's relative profitability (versus marriage).

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