Monday, July 5, 2010

Interesting Economics of Prostitition !!

Prostitution is one of the oldest profession in the world and functions like any other business. Like any other profession, economics of demand and supply can be applied in this profession also. All economic entities viz product, the supplier and the consumer exist in prostitution as well. However their interaction is not worth mentioning here. But what would be interesting to discuss here would be the economics of prostitution. If people have been selling sexual favors, what sort of economic condition exist for it?. Is it the need to support themselves financially that coax people to take up such jobs or is it the lucrativeness of this industry, as the people in this profession are highly paid. Both men and women are prostitutes, however major customers are males only. There are loads of economic puzzles involved in prostitution such as prostitutes are very low skilled workers yet they are highly paid and they don't have to make any significant investment to start their business apart from a few micro-miniskirts and stiletto heels.

Another puzzle that comes into mind is why prostitution is more common in poor and backward countries as compared to that in more developed countries? One obvious explanation is that prostitution falls as women's income and opportunity cost increases. What’s less obvious is that prostitution falls as men’s income rises, too. Because to some extent wives and prostitutes are substitutes, with prostitutes being what economists call an “inferior good”. As income rises men prefer stable marriages over occasional hookers. Stable marriages lead to children and studies have suggested that men carry a greater sense of responsibility once they have children which certainly reduces the intensity of visits to prostitutes. And this has policy implications too: the best way to reduce prostitution may be making both women and men richer, rather than legal penalties and informational campaigns. But is this economically feasible? Specially in poor countries where prostitution is more widespread.

Despite the ugliness of this profession and many legal bans by governments of various countries, prostitution has stayed the course. And now this industry contributes so much to the GDP that some governments just can't afford to loose the income earned from the taxes and thus have been forced to legalize it. Porn and sex are the most searched keywords on the internet. There may be any number of protests or rallies to put an end to prostitution, it will continue to exist and prosper as long as people realise the ethical implications of prostitution and return clean to their families. If we talk in terms of economics, a business will survive and prosper as long as the demand for its product sustains.

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