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Cold calculation of prostitution: premiums, opportunity cost, demand

Robert Skidelsky, a member of the British House of Lords, is professor emeritus of political economy at Warwick University in Coventry, England.

In recent decades, economics has been colonizing the study of human activities hitherto considered exempt from formal calculus. What critics call "economics imperialism" has given rise to an economics of love, of art, of music, of language, of literature and of much else.

The unifying idea underlying this extension of economics is that whatever people do, whether it is making love or making widgets, they aim to achieve the best results at the least cost. These benefits and costs can be reduced to money. So people are always looking for the best financial return on transactions.

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This is contrary to the popular separation of activities in which it is right (and rational) to count the cost, and those in which people do not (and should not) count the cost. To say that affairs of the heart are subject to cold calculation is, critics say, to miss the point. But cold-hearted calculation, economists reply, is exactly the point.

The pioneer of the economic approach to love was the Nobel laureate Gary Becker, who spent most of his career at the University of Chicago. In his seminal 1973 paper A Theory Of Marriage, he argued that selecting a partner is its own kind of market, and marriages occur only when both partners gain. It's a very sophisticated theory, relying on the complementary nature of male and female work, but it tends to treat love as a cost-reducing mechanism.

More recently, economists such as Columbia University's Lena Edlund and University of Marburg's Evelyn Korn, as well as Marina Della Giusta of Reading University, Maria Laura Di Tommaso of the University of Turin, and Steinar Strom of the University of Oslo, have applied the same approach to prostitution. Here, the economic approach might seem to work better, given that money is, admittedly, the only relevant currency. Professors Edlund and Korn treat wives and prostitutes as substitutes. A third alternative, working in a regular job, is ruled out by assumption.

According to the data, prostitutes make a lot more than women in ordinary jobs. Why is there such a high premium for such low skills?

On the demand side is the randy male, often in transit, who weighs the benefits of going with prostitutes against the costs of getting caught. On the supply side, the prostitute will require higher earnings to compensate for her higher risk of disease, violence and blighted marriage prospects. "If marriage is a source of income for women," Prof. Edlund and Prof. Korn write, "then the prostitute has to be compensated for forgone marriage market opportunities." The premium reflects the prostitute's opportunity cost.

There is a ready answer to the question of why competition does not drive down sex work's rewards: If prostitutes make less, they choose a less risky line of work.

What warrant does the state have to interfere with the contracts that are struck within this market of willing buyers and sellers? Why not decriminalize the market altogether, as many sex workers want? Like all markets, the sex market needs regulation, particularly to protect the health and safety of its workers. And, as in all markets, criminal activity, including violence, is already illegal.

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But on the other side, there is a strong movement to ban buying sex altogether. The so-called Sex Buyer Law, criminalizing the purchase, though not the sale, of sexual services, has been implemented in Sweden, Norway, Iceland and Northern Ireland. The enforced reduction of demand is expected to reduce supply, without the need to criminalize the supplier. There is some evidence that it has had the intended effect. (Though supporters of the so-called Nordic System ignore the effect of criminalizing the purchase of sex on the earnings of those who supply it, or would have supplied it.)

The movement to ban buying sex has been strengthened by the growth of international trafficking in women (as well as drugs). This may be counted as a cost of globalization, especially when it involves an influx into the West from countries where attitudes toward women are very different.

But the proposed remedy is too extreme. The premise of the Sex Buyer Law is that prostitution is always involuntary for women – that it is an organic form of violence against women and girls. But I see no reason to believe this. The key question concerns the definition of the word "voluntary."

True, some prostitutes are enslaved, and the men who use their services should be prosecuted. But there are already laws on the books against the use of slave labour. I would guess that most prostitutes have chosen their work reluctantly, under pressure of need, but not involuntarily. If men who use their services are criminalized, then so should people who use the services of supermarket checkout employees, call-centre workers and so on.

Then there are some prostitutes (a minority, to be sure) who claim to enjoy their work. And, of course, there are male prostitutes, gay and straight, who are typically ignored by feminist critics of prostitution. In short, the view of human nature of those who seek to ban the purchase of sex is as constricted as that of the economists. As St. Augustine put it, "If you do away with harlots, the world will be convulsed with lust."

Ultimately, all arguments against prostitution based on notions of inequality and coercion are superficial. There is, of course, a strong ethical argument against prostitution. But unless we are prepared to engage with that – and our liberal civilization is not – the best we can do is to regulate the trade.

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Project Syndicate

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