Who's Counting: Sexonomics -- Prostitutes' Incomes

May 7, 2006 -- -- 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).

If the surplus of men over women is temporary, say, because of war or upheaval, then the surplus usually leads to an even greater incentive to prostitution.

As permanent residents in a location, men are potential participants in both the marriage market and the sex markets, whereas if they're visitors, only the latter market is generally available and the supply of prostitutes and their incomes rise. The authors cite examples from 12th century crusaders to modern sex tourists.

The model also predicts that how much a woman damages her chances to marry by becoming a prostitute depends on how likely it is that she'll be exposed as one.

The likelihood shrinks if the woman leaves home and migrates to a different part of the country or to a different country altogether. This would also explain why foreign prostitutes are likely to be cheaper than domestic ones.

More generally, the abundance of foreign prostitutes shouldn't come as a surprise. Immigrants generally have difficulty finding employment and, except at the high end of the scale, prostitution does not place much of a premium on language skills. As in other parts of the economy, globalization is controversial and is one reason the number of women trafficked for sexual purposes is exaggerated. (It is considerably smaller than the number of people trafficked for nonsexual labor.)

There are good reasons -- from academic studies to the sheer ubiquity of prostitutes -- to believe that this heinous practice is relatively isolated and that only a small fraction of prostitutes are coerced into prostitution.

One last prediction the model makes is that the income differential paid to prostitutes will rise with the status the culture accords wives.

That is, if wives are valued highly, would-be prostitutes are giving up a lot by becoming prostitutes and will require more money to do so. And if wives have few privileges, would-be prostitutes aren't giving up much to become prostitutes and thus need less inducement to do so.

Cultural tolerance, of course, is a determinant not only of the income differential but also of the number of women who become prostitutes. Compare, for example, Thailand and Afghanistan.

Bottom Line

Like any statistical model, this one ignores the diversity of real people and the complexities of love and pleasure, changing social mores, et cetera. Still, once all its equations have been solved, a simple fact remains: Most women enter prostitution for the money.

This being so, legalizing it, regulating it (strictly enforcing laws against pimping, child prostitution, public nuisance and so forth) and improving the economic prospects for women seem to me a greatly preferable approach to it than moralistic denunciation.

Professor of mathematics at Temple University, John Allen Paulos is the author of best-selling books including "Innumeracy" and "A Mathematician Plays the Stock Market." His "Who's Counting?" column on ABCNews.com appears the first weekend of every month.