The SuperFreakonomics of Prostitution: Levitt and Dubner in Trouble Again

The new book from the authors of Freakonomics has a controversial chapter on prostitution.

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The long-awaited sequel to the best-seller Freakonomics is out, and you've almost certainly read about the controversies surrounding the book's chapter on global warming. But, before the book was even released, authors Levitt and Dubner caught some flak for the very first chapter in the book, which dares to ask the question, "Why aren't more women prostitutes?"

Portions of this chapter have been critcized for romanticizing prostitution and portraying it as a valid career choice. Now that I've read the chapter in full, I can say I walked away with a much different impression. Levitt and Dubner have some economic insights that, if fully considered, explain how society could make prostitution a less common profession.

They begin the chapter with evidence that one hundred years ago, prostitution was a much more popular profession than it is today—and as a result, much more lucrative. In the 1910s, apparently 1 out of every 50 American women worked as a prostitute. The low end of pay for a prostitute was $25,000 a year in today's dollars, and women working at the most expensive brothel in Chicago made over $430,000 annually. How does that compare to today? Using data gathered from in-the-field research, Levitt and Dubner found that an average prostitute in Chicago has a wage premium that "pales in comparison to the one enjoyed by even the low-rent prostitutes from a hundred years ago."

Why did their wages decline? Levitt and Dubner point to the fact that demand for sexual services declined. The liberalization of sexual mores meant that men no longer found a need to pay for sex as frequently (one example of the many interesting statistics in the book is that for 20 percent of American men born between 1933 and 1942, their first sexual encounter was with a prostitute).

So one might conclude that today, prostitution is only a realm for the desperate, poor, and drug-addicted. Levitt and Dubner get into trouble because they paint a slightly different picture. Most of the latter half of the chapter focuses on the modern-day story of one high-end escort, Allie, who at one point charged $500 an hour and made well over $200,000 a year. According to the authors, she did not pursue this work because she had to, but because she saw the money-making opportunities. This, to me, is perhaps the primary insight of the chapter: Even when it comes to selling sex, incentives matter. Higher wages for prostitutes mean more prostitution.

This incentive effect seems to be true even when we're not talking about the high end of the scale. The title of the chapter asks, "how is a street prostitute like a department-store Santa?" A department-store Santa is someone who does something else most of the year, but during this one period of spiked demand for jolly bearded men, takes up another job. According to Levitt and Dubner's research, street prostitution in the poor Chicago neighborhood of Washington Park works the same way: during the busy Fourth of July weekend, demand for prostiution "skyrockets," and as a result, a number of part-time prostitutes crop up for this one busy time of year. These women are able to get by the vast majority of the year without resorting to prostitution, but on this one weekend, the opportunity for high wages makes a difference.

Here's why Levitt and Dubner are getting an unfair rap: they've revealed something valuable for people who want to reduce prostitution and the negative effects it has on women. If the number of prostitutes is really responsive to the profitability of the profession, as Levitt and Dubner seem to show, then lower wages will mean fewer prostitutes.

As previously mentioned, sexual mores have softened. So what's keeping wages up? Here's what the authors of SuperFreakonomics say about Allie:

The truth is she would be distraught if prostitution were legalized, because her stratospherically high wages stem from the fact that the service she provides cannot be gotten legally.