Prostitute or entrepreneur?

Kacper Niburski

Assistant News Editor

By coupling what appears to be the outright absurd with powerful economic insight, one can decant much of the natural world, leaving a variety of shocking conclusions. One of these is that prostitutes demonstrate economic acumen.
While history stands as a chronicle of women’s strife in a patriarchal world, one profession has remained predominantly female: prostitution. This is due to the simple economic principle that high demand leads to high supply; the former of which is attributed to males’ libido as much as it is to their biological tendencies. Apparently a man’s sexual lust goes unsatisfied and prostitution - any service at every price - serves as a release for this carnal urgency.
Hard to believe? Economist Steven Levitt and columnist Stephen Dubner, authors of Superfreakonomics, purport that in the early 19th century, prostitution proliferated in America. Empirical evidence collected in 1912 by the Department of Justice discovered that prostitution employed 200,000 women in 310 American cities. Restricting this number to the age of 20, approximately one and every fifty women was a prostitute. It seems that rather being forced into prostitution, women were choosing it for themselves.
Not only was there a high incidence of young women in prostitution, but Levitt and Dubner state that it was these same women who were making the upper salaries of $76 per week. When comparing this to women who only made $6 per week in non-commercial sex labour, the question was not why prostitution, but rather why not?

Forgetting the arguments of abuse, gender mistreatment, and a cycle of coercion that is otherwise forgotten, prostitution is an economic sector like any other. To see this, it must be separated from other unskilled labours. This is because compared to other unskilled labour, prostitutes are paid excessively higher wages. The reason for this is twofold. First, prostitution has the opportunity cost of marriage associated with it. Like all things, exceptions do exist; but evidence concludes that a wife cannot be a “whore”, and vice versa. If this is true, then prostitution must pay significantly more than other jobs to compensate for the opportunity cost of foregone marriage. Women must be compelled, either voluntary through cash incentives or involuntary by economic pressures, to transfer themselves from the marital market to the prostitution market.
The second reason is that prostitutes practice price discrimination; that is, the sale of an identical service transacted at a different price from the same provider. For this to occur, two conditions must be met: some customers must be inclined to pay more than others and the seller must prevent resale of the product to destroy any arbitrage opportunities.
The second condition is met automatically: sex cannot be resold. By the same token, the first condition is also met. If transient consumers exist in the market, that is to say those who purchase prostitutes without knowing the local prices, then the providers may maximize the surplus they extract by exploiting the customer. Levitt and Dubner noted that prices hiked temporarily on the market, however, a variety of regular customers still maintained the same going rate as before. For the most part, these hikes occurred during the Fourth of July - making the prostitutes nothing less than patriotic.
Yet, why aren’t wages hiked up indefinitely? This is because of the competitive market scheme in modern prostitution. At the uttermost extremes of the profession, there exists streetwalkers, those who are paid the least, and the escorts, those who are paid substantially higher. Such stark wage differences within the profession are due to the fact that a streetwalker, unlike an escort, is a perfectly substitutable commodity. While both sell sex, the escort doesn’t sell sex alone. Escorts also offer social contact, scintillating conversations, and brief companionship. In a way, they are temporary trophy wives.
All prostitutes cannot be escorts, though. This stems from the fact that as one climbs the supply of prostitutes and demand of consumers, a screening process takes place. On the supply-side, only prostitutes of the highest caliber - both physically and intellectually - are possible of demanding an exorbitant price. On the demand side, the escort’s high price signal attracts wealthy clients that perceive such rates as a sign of quality. If the rate is not justified, then the prostitute will not be paid, and will have to bid her price down until equilibrium is reached.

It should be noted then that any attempt at criminalization would fail to stifle prostitution. Instead, it will enhance it.

Rather than exacting punitive measures onto consumers, criminalization mainly targets the prostitutes - the meat on the street. This leads to a scarcity in the number of prostitutes, and according to basic supply and demand analysis, shifts the supply curve to the left. As a response, prostitutes would now command a higher price than before, which is captured by the higher equilibrium point. And soon, more women would be enticed into the profession.
Granted, even sex is a competitive market scheme. So while males still have the unsatiated desire for sex, there exists an opposing market, a cheaper, less stigmatized substitute: free sex. Whether it be through extra-marital affairs, one night stands, or swingers clubs, males satisfy their sexual desire by other means. For this reason, prostitution has decreased its wage earnings from the data Levitt and Dubner noted. And because of the profit-driven nature of the prostitution industry, a decrease in wages will also result in a decrease in prostitutes because no longer is the foregone cost of marriage, nor are the risks of violence, contracting an STD, and inevitable stigma, compensated for.
Thus, while it is agreed that prostitution is neither desired nor necessarily moral, it functions like that of any economic sector: pimps are counted as firms, buyers as customers, and prostitutes as workers. Even though few costs are associated - save for a few microskirts and high heels - the prostitute follows the demand and supply analysis as all shrewd economists would.

That is to say, literally screwing the system to derive the highest profit.