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Demand for sex in Japan

Mentioning sex in a blog post is a great way to generate some interesting traffic.  The last time I filled some time writing about it (on the rise of public sexuality, the rationality of prostitution and the extent of human trafficking), I got hits via some very odd queries on Google.

Titillation aside,  prostitution is a tremendously interesting topic in economics .  As John Hempton discussed initially in July 2008 and more extensively in May 2009, the price of prostitution is enormously flexible, unlike prices (and wages) in most industries.  That means that when, as John discussed, a country is operating under a fixed exchange rate and only prices can adjust in response to a macroeconomic shock, the sex industry will almost certainly move both first and furthest.

But because prostitution has very flexible wages and prices, that also makes it a candidate proxy for estimating changes in the potential output of an economy — the output that would occur if all prices were perfectly flexible.  (Remember there are differences between potential and natural levels of output)

I mention this after reading that the Bank of Japan is conducting surveys to estimate changes in demand in the Japanese sex industry:

The survey of sex shops and restaurants was designed to better gauge demand for services, an area of the economy that’s becoming more important as exports slump. “Any study into services is most welcome,” said Martin Schulz, senior economist at Fujitsu Research Institute in Tokyo. “We’ve got hundreds of studies on exports and manufacturing. What’s needed is creative thinking on services and if that includes brothels, so be it.” … While services including restaurants and retailing make up about 60 percent of gross domestic product, Japan’s economy has risen and fallen with the strength of its exports.

(Hat tip:  Tyler Cowen).

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How bad is human trafficking?

Adam pointed me to this review in the New Statesman by Brendan O’Neil of “Sex at the Margins: Migration, Labour Markets and the Rescue Industry” (Foyles, Amazon) by Laura María Agustín. Here is the core of the review:

Agustín points out that some anti-trafficking activists depend on numbers produced by the CIA (not normally considered a reliable or neutral font of information when it comes to international issues), even though the CIA refuses to “divulge its research methods”. The reason why the “new slavery” statistics are so high is, in part, that the category of trafficking is promiscuously defined, sometimes disingenuously so. Some researchers automatically label migrant women who work as prostitutes “trafficked persons”, basing their rationale on the notion that no woman could seriously want to work in the sex industry. The Coalition Against Trafficking in Women argues that “all children and the majority of women in the sex trade” should be considered “victims of trafficking”. As Agustín says, such an approach “infantilises” migrant women, “eliminating any notion that women who sell sex can consent”. Ironically, it objectifies them, treating them as unthinking things that are moved around the world against their will.

The reality is very different, the author says. Most migrant women, including those who end up in the sex industry, have made a clear decision to leave home and take their chances overseas. They are not “passive victims” who must be “saved” by anti-trafficking campaigners and returned to their country of origin. Rather, frequently, they are headstrong and ambitious women who migrate in order to escape “small-town prejudices, dead-end jobs, dangerous streets and suffocating families”. Shocking as it might seem to the feminist social workers, caring police people and campaigning journalists who make up what Agustín refers to as the “rescue industry”, she has discovered that some poor migrant women “like the idea of being found beautiful or exotic abroad, exciting desire in others”. I told you it was controversial.

One of Agustín’s chief concerns is that the anti-trafficking crusade is restricting international freedom of movement. What presents itself as a campaign to protect migrants from harm is actually making their efforts to flee home, to find work, to make the most of their lives in often difficult and unforgiving circumstances, that much harder. She writes about the “rescue raids” carried out by police and non-governmental organisations, in which even women who vociferously deny having been trafficked may be arrested, imprisoned in detention centres and sent back home – for the benefit of their own mental stability, of course. It used to be called repatriation; now, dolled up in therapeutic lingo, it is called “rescue”.

For all its poisonous prejudices, the old racist view of migrants as portents of crime and social instability at least treated them as autonomous, sentient, albeit “morally depraved”, adults. By contrast, as the author illustrates, the anti-trafficking lobby robs migrants of agency and their individual differences, and views them as a helpless, swaying mass of thousands who must be saved by the more savvy and intelligent women of the west and by western authorities.

It’s fascinating stuff and goes along with what I’ve previously said about prostitution:

[Slavery] aside (and that’s what people trafficking is – slave trading), you cannot simply save or rescue a prostitute. It is not a problem, if you consider it one, to be tackled. It is not something that you solve, once and for all. Prostitutes are people like everyone else and like everyone else, they think on the margin and respond to incentives.

In that entry I labelled human trafficking as slavery and I stand by that. Nevertheless, it would appear from Agustín’s work that the scale of the trafficking problem may be smaller than we commonly believe.

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Thinking on the margin: prostitution (UPDATED)

One of the most important ideas in economics is that people think and act on the margin. By that I mean that we make our decisions as if we were looking at the costs and benefits of just one more. Just one more slice of pizza. Just one more minute on the bike in the gym. Just one more share of some stock bought. If we reckon the benefits of that one more to be greater than the cost of it, irrespective of what has come before and what may come after, we’ll typically do it. The point is that we optimise, or at least act as though we optimise. We may only optimise locally instead of globally (that last slice of pizza may have seemed like a good idea at the time, but it’s not much good for my health in general), but it’s still what we do.

The idea is by no means unique to economics. There is, at the least, an entire branch of mathematics devoted to it. But economists just love to point out that optimisation – and, therefore, thinking on the margin – applies to human behaviour just as well as it does to equations on a blackboard, and that realisation can sometimes lead to surprising, even counter-intuitive observations with serious consequences for public policy.

As I’ve mentioned before (here and here), Steven Levitt and Sudhir Venkatesh are currently finishing a paper on street prostitution in Chicago. They were able to study the provision of prostitution services during a predictable demand shock and discovered that the supply of prostitution services is rather elastic: a 63% increase in quantity was associated with only a 30% increase in price. More importantly, that increase came on three margins: an increase in supply from existing prostitutes (who, on average, only work 13 hours a week), a temporary in-migration of prostitutes from other areas and the temporary entry into the market of women who are not ordinarily willing to perform sex acts for money. Levitt and Venkatesh estimate that 43 of the 63% increase in the number of tricks came from existing prostitutes in the area and the remaining 20 from the in-migrating prostitutes and the temporary market entrants.

That third margin bears highlighting. Typical thinking about the topic holds that the choice to become a prostitute, if it is a choice at all, is a discrete [update:  I originally had “discreet”.  It’s certainly that 🙂] one; that women and a very few men first choose – or are compelled – to be a prostitute and only then consider what money they might make. The idea that some women might choose to start or stop being a prostitute in the face of a ten, five or even one dollar an hour change in the money available doesn’t make sense in this thinking. I believe that the reason for this is founded in a moral abhorrence at the very idea of prostitution – the belief that in addition to any social or economic conditions faced by prostitutes, the act of prostitution itself is immoral. Since it has become au fait, among Western intelligentsia at least, to never accuse people of direct moral failure, it has also become the norm to conclude that all prostitutes were misled or forced into their position and thus need to be rescued. The terrible issue of people trafficking naturally lends support to this idea.

I do not want to belittle the tragedy and travesty that is people trafficking. It is a truly awful phenomenon and the fact that it exists at all, let alone in countries that are supposed to be based on freedom of the individual as a founding tenet, is abhorrent. It needs to be stamped out.

My concern is to highlight that not all prostitutes are forced into their profession. There really are women who, faced with an outside option of $7/hour, are not willing to be a prostitute for $25/hour, but are willing to do so for $35/hour. I have no doubt at all that – and this is important – the same statement would be true if you multiplied all of those figures by 10.

The upshot of this is that, slaves aside (and that’s what people trafficking is – slave trading), you cannot simply save or rescue a prostitute. It is not a problem, if you consider it one, to be tackled. It is not something that you solve, once and for all. Prostitutes are people like everyone else and like everyone else, they think on the margin and respond to incentives. If your concern is that prostitutes live in poverty, that they are compelled into their work by economic hardship, then you must work to improve their outside options. But at the same time, you should recognise that you will not be stopping prostitution from happening; you will simply be raising the minimum asking price. That will lower the quantity demanded, but it will never remove it altogether.

Update (5 April 2008):

See my new entry here. It would appear that maybe even the figures for human trafficking are overblown.

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Sex for free

Following on from my earlier post noting (via Andrew Leigh) that Steven Levitt and Sudhir Venkatesh have been researching street prostitution in Chicago, Andrew managed to find a link to a preliminary draft of the paper. You can find it here. Andrew also noted that:

Levitt cited evidence that in the 1930s-50s, a very large share of men had their first sexual experience with a prostitute. With the rise of premarital sex, this is no longer true, so the market that’s left today is much seedier than in the past.

This would seem to imply that early sexual encounters once represented a sizable, or at least influential, portion of demand, which is interesting in itself.

Many modern-day feminists despair at the way that the so called “sexual revolution” has developed and I do wonder where the current arc of embracing sexuality will stabilise.

Here is a recent story from ABC News being shocked (shocked!) to discover that college parties are both racier and boozier than they used to be at some unspecified time in the past. They report (and fret) that girls seem to drink more at themed parties, where they also tend to wear less.

Here is a story about the merging of reality television and the public acceptability of sex for it’s own sake. A Czech brothel is offering it’s services for free in exchange for the clients’ permission to broadcast the event over the internet.

I suspect that the Czech offering is just the latest in a recent push for a form of authenticity or believability in pornography. It seems to go hand-in-hand with an increase in the popularity of amateur porn, which has two broad sub-categories: the professionally arranged and the truly amateur.

Truly amateur pornography, where the participants film or photograph themselves and share the material for free is arguably the ultimate sharing of the self in the web 2.0 paradigm [1]. It is a logical extension of the attention-seeking self-affirmation that we see in people’s embracing of a public side to their sexuality.

Professional outfits that seek out amateurs who are willing to be filmed (possibly for free) and then offer the material in the traditional business model of internet porn (give out teaser snippets for free and charge for the complete set) , seem to be the adult industry’s response to this shifting demand. In a way, the Czech brothel is just a new branch of this genre.

These developments are not without their concerns. Sara Montague – a presenter on BBC Radio 4’s Today programme – is clearly concerned, noting that much of the movement seems grounded in the hope of empowerment and self-confidence, but worrying that this serves indirectly to promote eating disorders among girls and the acceptance of rape among boys.

The main problem that Montague faces is that for most people, embracing public sexuality is non-harmful – not every girl gets an eating disorder and not every boy contemplates forcing himself on a girl – and is undertaken by choice. Montague is, in essence, faced with Douglas Adams’ cow that wants to be eaten. [2]

There is a saying that seeks to advise against supporting or encouraging prostitution: “No little girl ever says that when she grows up, she wants to be a prostitute.” The idea is a variation on Rawls‘ “veil of ignorance” and implicitly argues that the framing of a choice is of vital importance: that given a wider range of options than those she faces, no woman would choose to be a prostitute.

Montague may argue that just as the prostitute is compelled into her profession by a narrowing of her options, people are lead to an acceptance of public sexuality because of social conditioning. In her article she highlights the flood of media imagery seemingly designed to associate female success with sexiness. In other words, Montague is pointing out that Adams’ cow was genetically engineered to want to be eaten and asking if the cow then truly had a free choice. That question, of course, is moot when considering the cow in front of you. Its preferences may have been implanted, but as a conscious entity, you have to respect it’s choices. At most, you can try to stop future cows from being interfered with.

But to make the same argument for public sexualisation is still predicated on the idea that it is inherently a bad thing. I am not in any way trying to belittle the tragedy of eating disorders or defend the horror of rape, but the point is to weigh the benefits against the costs in aggregate. There is a parallel with opening a country up to trade and allowing jobs to be “lost” to, say, China. It is true that some people will lose their jobs and for them, the pain is tremendous; but it is also true that the vast majority of people experience a small improvement in their material lives because of the cheaper products. It is almost always the case that in aggregate, the latter outweighs the former and the social ideal is to open up to trade but have those that benefit compensate those that suffer.

The same, I think, applies to the progress of public sexualisation. By all means work to increase support for those burdened excessively by concerns of body image. By all means increase support to rape victims and ease the ability of the state to bring those guilty to justice. But that doesn’t mean we should fight to stop it altogether if people choose it freely and feel that it helps them, or even if they just enjoy it.

[1] Yes, I hate that word too; but what else should I have said?

[2] In The Restaurant at the End of the Universe (Foyles, Waterstones, Amazon), Adams had his characters encounter a cow in a restaurant that wanted to be eaten, going so far as to recommend particular parts of it’s body.

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Interesting empirics

I cannot wait to read the paper coming out of this:

Most women work 11 hours a week and … make $25-40 per hour [versus] $7-10 per hour … in the formal sector.  They are violently victimised once a month.

Prostitutes who work with pimps have higher wages and better conditions.

Supply is quite elastic [a 60% shock in demand occurred with only a 30% increase in prices], adjusting on three margins – higher labour supply by existing prostitutes, in-migration by prostitutes from other areas, and ‘temporary prostitutes’ joining the market.

Doing this research in America, where both the provision and the consumption of prostitution is illegal, is a major achievement for Levitt and Venkatesh.  Has anything equivalent ever been done in countries where the law is less restrictive?