Comedian Jim Norton wrote a funny piece for Time regarding legalizing prostitution. Norton is a big fan of prostitutes, and unashamed of this fact. He stipulates that legalizing prostitution would improve conditions for sex workers and reduce violence towards them.
“By keeping prostitution illegal because we find it “morally objectionable,” we allow (or, more accurately, you allow) sex workers to constantly be put into dangerous situations. Studies have shown that rapes and STDs dropped drastically between 2003 and 2009 in Rhode Island after the state accidentally legalized it. “
As Norton mentions,
“A study in the American Journal of Epidemiology found that the "workplace homicide rate for prostitutes" was 50 times greater than the next most perilous situation for women, working in a liquor store.”
Most prostitutes are controlled by pimps not only in the sense of their employment, but also in every aspect of their lives. As many sex workers are runaways or people who were down on their luck, they depend on their pimp for housing, food, clothing, and more. The Urban Institute produced a must-read report on the subject—The Hustle: The Economics of the Underground Commercial Sex Industry—featuring easy-to-understand language and clear graphics.
Image from The Hustle, by the Urban Institute
In the case of prostitution, the data clearly presents that legalization and regulation would improve conditions for sex workers and generate additional taxes. As long as the taboo surrounding sex persists, the negative culture that preys on vulnerable women will as well. It should be noted that the type of prostitute we are discussing here is what we call a streetwalker. The occupation of a streetwalker is inherently much more dangerous than that of a high-class escort, though they are actually less common:
"Streetwalkers have always attracted the lion’s share of attention from policymakers and researchers because they ply their trade in public places. They are more bothersome for everyone else—and, because they are the most vulnerable, more likely to come to the attention of the police and of social or health workers. But in many rich countries they are a minority of all sex workers; just 10-20% in America, estimates Ronald Weitzer, a sociologist at George Washington University." (The Economist)
The dawn of the Internet era opened up many doors for prostitutes that make their jobs safer and easier. The Economist wrote about the online marketplace for sex, including analyzing the innumerable websites where prostitutes can set up profiles, add photos, and get reviews for themselves or clients. The stigma attached to the idea of selling one's body on the street decreases as prostitutes can exercise more control over who they see, what they do with clients, and when they see clients. Online, prostitutes can work without a middle-man (pimp) while reducing the risks of violence and STD transmission (even requiring clients to show them STD test results!).
Alas, the basic concepts of economics still apply, though - the online market for sex has become more saturated (increased supply) while hard economic times have hit (decreasing demand). Duly, the prices prostitutes may charge have decreased:
Image from The Economist
Sex for money may be viewed as more of a luxury good - demand will decrease as income decreases. The rise of online dating sites, hook-up apps (Grindr, Tinder), and adultery websites are also a competitive threat to the online sex marketplace. An app where someone can go and find sex (for free, or perhaps the cost of a dinner) acts as a substitute to prostitution. Hard economic times as well as the rise of substitutes make this market a bit more challenging to navigate. Nevertheless, many prostitutes are not deterred, and use online sites to bring in side income. How much they will be able to make heavily depends on their looks and ethnicities - a premium goes for blonde, athletic women with D-cups - though in different places around the world, different qualities are desired.
Even for those who are not paying for sex, sex has a cost. I’d like to highlight an old article by Steven Levitt and Stephen Dubner, who you may know as the authors of Freakonomics. Economists calculate price as not just the fiscal cost of something, but as including opportunity cost. Given the existence of STDs, one can imagine that having unprotected sex might have a cost associated with it—the potential medical costs of an STD, infertility, or even death. During the HIV/AIDs crisis, the opportunity cost of having sex for gay men skyrocketed:
“Setting the value of an American life at $2 million, Francis calculated that in terms of AIDS-related mortality, it cost $1,923.75 in 1992 (the peak of the AIDS crisis) for a man to have unprotected sex once with a random gay American man versus less than $1 with a random woman.”
Andrew Francis (the calculator of above statistic) wrote about how sexual behavior is influenced by HIV/AIDs, finding that individuals changed their sexual habits based on historic exposure to the effects of the disease. His findings imply that sexual behavior is tangibly motivated by incentives and can duly be changed by them.
The popular “Economics of Sex” video from the Austin Institute expounds on the idea that sexual behavior is controlled by incentives and can be altered by changes to the market (economic shocks). For reference, an economic shock is an event that occurs outside of a given market, but produces a significant change within it. The invention of cars would have been an economic shock to the market for horse-drawn carriages. The Economics of Sex video argues that the introduction of birth control acted as an economic shock in the market for sex, changing incentives and how individuals behaved. In the case of Francis’ study, the economic shock was the rise of a deadly STD.
By examining sex as a market, we can better understand incentives, market shocks, and policy implications. The greatest strength of the economic discipline is its ability to apply a framework to any social issue, arriving at a numerical/factual conclusion based on said framework. While many may disagree on frameworks used, economics provides a vehicle to arrive at rational stances on issues that may otherwise be colored by personal experience and context.
Money represents a social agreement, which has implications for how we value wealthy people. Bitcoin replaces the need for this social agreement with technology, and in doing so challenges the values we ascribe to wealth.