An Economic Analysis of Prostitution
Say Ray’s friend Lenore wants to purchase Ray’s prostitution services and she values them at $400. But when Lenore does this it bothers Ray’s other friend Tonya. If the negative utility Tonya experiences is worth more than $400, then the market provides a mechanism for Tonya to satisfy her wants: she can pay Ray $401 not to sleep with Lenore.
The whole post is actually quite funny. Matt Yglesias weighs in here.
Spoken like an economist.
Is this really the way economists think?
The commentary suggests that there aren’t any real externalities to prostitution, because the parties who would prohibit it aren’t willing to pay people not to provide those services. The argument is absurd, because not only would you have to pay all prostitutes not engage in those activities, you would have to pay everyone not to engage in those activities. Sounds like market failure to me.
Similarly, people who claim there are externalities to murder, for example, would have to pay everyone in the world not to murder anyone.
It is much more efficient just to prohibit it, with no compensation to anyone. That’s why, contrary to the desire of anarchists and some economists, the whole world is covered by nation states that prohibit activities without compensation or the voluntary agreement of those affected.
Vicki, in their more sober moments, this is not the way economists think.
Neighborhood groups often team up to ban adult entertainment through zoning, harassment or other legal means. Negative externalities — typically crime — is usually given as the reason behind these initiatives. I wondered if crime is actually reduced by not congregating near adult entertainment venues? Or if not allowing people who commit petty crimes to concentrate it in adult establishments near neighborhoods merely spreads out (i.e. dilutes their petty crimes)?
Joe, how do you know there are significant externalities associated with prostitution? I would think most of the effects would be internalized. (No pun intended.)