Super Freakonomics Part 3

"Is it any wonder," the commission declared, "that a tempted girl who receives only $6 per week working with her hands sells her body for $25 per week when she learns that there is demand for it and men are willing to pay the price?"

Converted into today's dollars, the $6-per-week shopgirl had an annual salary of only $6,500. The same woman who took up prost.i.tution at $25 a week earned the modern equivalent of more than $25,000 a year. But the Vice Commission acknowledged that $25 per week was at the very low end of what Chicago prost.i.tutes earned. A woman working in a "dollar house" (some brothels charged as little as 50 cents; others charged $5 or $10) took home an average weekly salary of $70, or the modern equivalent of about $76,000 annually.

At the heart of the Levee, the South Side neighborhood that housed block after block of brothels, stood the Everleigh Club, which the Vice Commission described as "the most famous and luxurious house of prost.i.tution in the country." Its customers included business t.i.tans, politicians, athletes, entertainers, and even a few anti-prost.i.tution crusaders. The Everleigh's prost.i.tutes, known as "b.u.t.terfly girls," were not only attractive, hygienic, and trustworthy, but also good conversationalists who could cite cla.s.sical poetry if that's what floated a particular gentleman's boat. In the book Sin in the Second City, Karen Abbott reports that the Everleigh also offered s.e.xual delicacies that weren't available elsewhere-"French" style, for instance, commonly known today as oral s.e.x.

In an age when a nice dinner cost about $12 in today's currency, the Everleigh's customers were willing to pay the equivalent of $250 just to get into the club and $370 for a bottle of champagne. Relatively speaking, the s.e.x was pretty cheap: about $1,250.

Ada and Minna Everleigh, the sisters who ran the brothel, guarded their a.s.sets carefully. b.u.t.terflies were provided with a healthful diet, excellent medical care, a well-rounded education, and the best wage going: as much as $400 a week, or the modern equivalent of about $430,000 a year.

To be sure, an Everleigh b.u.t.terfly's wages were off the charts. But why did even a typical Chicago prost.i.tute one hundred years ago earn so much money?

The best answer is that wages are determined in large part by the laws of supply and demand, which are often more powerful than laws made by legislators.

In the United States especially, politics and economics don't mix well. Politicians have all sorts of reasons to pa.s.s all sorts of laws that, as well-meaning as they may be, fail to account for the way real people respond to real-world incentives.

When prost.i.tution was criminalized in the United States, most of the policing energy was directed at the prost.i.tutes rather than their customers. This is pretty typical. As with other illicit markets-think about drug dealing or black-market guns-most governments prefer to punish the people who are supplying the goods and services rather than the people who are consuming them.

But when you lock up a supplier, a scarcity is created that inevitably drives the price higher, and that entices more suppliers to enter the market. The U.S. "war on drugs" has been relatively ineffective precisely because it focuses on sellers and not buyers. While drug buyers obviously outnumber drug sellers, more than 90 percent of all prison time for drug convictions is served by dealers.

Why doesn't the public support punis.h.i.+ng users? It may seem unfair to punish the little guy, the user, when he can't help himself from partaking in vice. The suppliers, meanwhile, are much easier to demonize.

But if a government really wanted to crack down on illicit goods and services, it would go after the people who demand them. If, for instance, men convicted of hiring a prost.i.tute were sentenced to castration, the market would contract in a hurry.

In Chicago some one hundred years ago, the risk of punishment fell almost entirely on the prost.i.tute. Besides the constant threat of arrest, there was also the deep social stigma of prost.i.tution. Perhaps the greatest penalty was that a woman who worked as a prost.i.tute would never be able to find a suitable husband. Combine these factors and you can see that a prost.i.tute's wages had to be high to entice enough women to satisfy the strong demand.

The biggest money, of course, was taken home by the women at the top of the prost.i.tution pyramid. By the time the Everleigh Club was shut down-the Chicago Vice Commission finally got its way-Ada and Minna Everleigh had acc.u.mulated, in today's currency, about $22 million.

The mansion that housed the Everleigh Club is long gone. So is the entire Levee district. The very street grid where the Everleigh stood was wiped away in the 1960s, replaced by a high-rise housing project.

But this is still the South Side of Chicago and prost.i.tutes still work there-like LaSheena, in the black-and-red tracksuit-although you can be pretty sure they won't be quoting you any Greek poetry.

LaSheena is one of the many street prost.i.tutes Sudhir Venkatesh has gotten to know lately. Venkatesh, a sociologist at Columbia University in New York, spent his grad-school years in Chicago and still returns there regularly for research.

When he first arrived, he was a nave, sheltered, Grateful Deadloving kid who'd grown up in laid-back California, eager to take the temperature of an intense town where race-particularly black and white-played out with great zeal. Being neither black nor white (he was born in India) worked in Venkatesh's favor, letting him slip behind the battle lines of both academia (which was overwhelmingly white) and the South Side ghettos (which were overwhelmingly black). Before long, he had embedded himself with a street gang that practically ran the neighborhood and made most of its money by selling crack cocaine. (Yes, it was Venkatesh's research that figured prominently in the Freakonomics chapter about drug dealers, and yes, we are back now for a second helping.) Along the way, he became an authority on the neighborhood's underground economy, and when he was done with the drug dealers he moved on to the prost.i.tutes.

But an interview or two with a woman like LaSheena can reveal only so much. Anyone who wants to really understand the prost.i.tution market needs to acc.u.mulate some real data.

That's easier said than done. Because of the illicit nature of the activity, standard data sources (think of census forms or tax rolls) are no help. Even when prost.i.tutes have been surveyed directly in previous studies, the interviews are often conducted long after the fact and by the kind of agency (a drug-rehab center, for instance, or a church shelter) that doesn't necessarily elicit impartial results.

Moreover, earlier research has shown that when people are surveyed about stigmatizing behavior, they either downplay or exaggerate their partic.i.p.ation, depending on what's at stake or who is asking.

Consider the Mexican welfare program Oportunidades. To get aid, applicants have to itemize their personal possessions and household goods. Once an applicant is accepted, a caseworker visits his home and learns whether the applicant was telling the truth.

Cesar Martinelli and Susan W. Parker, two economists who a.n.a.lyzed the data from more than 100,000 Oportunidades clients, found that applicants routinely underreported certain items, including cars, trucks, video recorders, satellite TVs, and was.h.i.+ng machines. This shouldn't surprise anyone. People hoping to get welfare benefits have an incentive to make it sound like they are poorer than they truly are. But as Martinelli and Parker discovered, applicants overreported other items: indoor plumbing, running water, a gas stove, and a concrete floor. Why on earth would welfare applicants say they had these essentials when they didn't?

Martinelli and Parker attribute it to embarra.s.sment. Even people who are poor enough to need welfare apparently don't want to admit to a welfare clerk that they have a dirt floor or live without a toilet.

Venkatesh, knowing that traditional survey methods don't necessarily produce reliable results for a sensitive topic like prost.i.tution, tried something different: real-time, on-the-spot data collection. He hired trackers to stand on street corners or sit in brothels with the prost.i.tutes, directly observing some facets of their transactions and gathering more intimate details from the prost.i.tutes as soon as the customers were gone.

Most of the trackers were former prost.i.tutes-an important credential because such women were more likely to get honest responses. Venkatesh also paid the prost.i.tutes for partic.i.p.ating in the study. If they were willing to have s.e.x for money, he reasoned, surely they'd be willing to talk about having s.e.x for money. And they were. Over the course of nearly two years, Venkatesh acc.u.mulated data on roughly 160 prost.i.tutes in three separate South Side neighborhoods, logging more than 2,200 s.e.xual transactions.

The tracking sheets recorded a considerable variety of data, including:

The specific s.e.xual act performed, and the duration of the trickWhere the act took place (in a car, outdoors, or indoors)Amount received in cashAmount received in drugsThe customer's raceThe customer's approximate ageThe customer's attractiveness (10 = s.e.xy, 1 = disgusting)Whether a condom was usedWhether the customer was new or returningIf it could be determined, whether the customer was married; employed; affiliated with a gang; from the neighborhoodWhether the prost.i.tute stole from the customerWhether the customer gave the prost.i.tute any trouble, violent or otherwiseWhether the s.e.x act was paid for, or was a "freebie"

So what can these data tell us?

Let's start with wages. It turns out that the typical street prost.i.tute in Chicago works 13 hours a week, performing 10 s.e.x acts during that period, and earns an hourly wage of approximately $27. So her weekly take-home pay is roughly $350. This includes an average of $20 that a prost.i.tute steals from her customers and acknowledges that some prost.i.tutes accept drugs in lieu of cash-usually crack cocaine or heroin, and usually at a discount. Of all the women in Venkatesh's study, 83 percent were drug addicts.

Like LaSheena, many of these women took on other, non-prost.i.tution work, which Venkatesh also tracked. Prost.i.tution paid about four times more than those jobs. But as high as that wage premium may be, it looks pretty meager when you consider the job's downsides. In a given year, a typical prost.i.tute in Venkatesh's study experienced a dozen incidents of violence. At least 3 of the 160 prost.i.tutes who partic.i.p.ated died during the course of the study. "Most of the violence by johns is when, for some reason, they can't consummate or can't get erect," says Venkatesh. "Then he's shamed-'I'm too manly for you' or 'You're too ugly for me!' Then the john wants his money back, and you definitely don't want to negotiate with a man who just lost his masculinity."

Moreover, the women's wage premium pales in comparison to the one enjoyed by even the low-rent prost.i.tutes from a hundred years ago. Compared with them, women like LaSheena are working for next to nothing.

Why has the prost.i.tute's wage fallen so far?

Because demand has fallen dramatically. Not the demand for s.e.x. That is still robust. But prost.i.tution, like any industry, is vulnerable to compet.i.tion.

Who poses the greatest compet.i.tion to a prost.i.tute? Simple: any woman who is willing to have s.e.x with a man for free.

It is no secret that s.e.xual mores have evolved substantially in recent decades. The phrase "casual s.e.x" didn't exist a century ago (to say nothing of "friends with benefits"). s.e.x outside of marriage was much harder to come by and carried significantly higher penalties than it does today.

Imagine a young man, just out of college but not ready to settle down, who wants to have some s.e.x. In decades past, prost.i.tution was a likely option. Although illegal, it was never hard to find, and the risk of arrest was minuscule. While relatively expensive in the short term, it provided good long-term value because it didn't carry the potential costs of an unwanted pregnancy or a marriage commitment. At least 20 percent of American men born between 1933 and 1942 had their first s.e.xual intercourse with a prost.i.tute.

Now imagine that same young man twenty years later. The s.h.i.+ft in s.e.xual mores has given him a much greater supply of unpaid s.e.x. In his generation, only 5 percent of men lose their virginity to a prost.i.tute. And it's not that he and his friends are saving themselves for marriage. More than 70 percent of the men in his generation have s.e.x before they marry, compared with just 33 percent in the earlier generation.

So premarital s.e.x emerged as a viable subst.i.tute for prost.i.tution. And as the demand for paid s.e.x decreased, so too did the wage of the people who provide it.

If prost.i.tution were a typical industry, it might have hired lobbyists to fight against the encroachment of premarital s.e.x. They would have pushed to have premarital s.e.x criminalized or, at the very least, heavily taxed. When the steelmakers and sugar producers of America began to feel the heat of compet.i.tion-in the form of cheaper goods from Mexico, China, or Brazil-they got the federal government to impose tariffs that protected their homegrown products.

Such protectionist tendencies are nothing new. More than 150 years ago, the French economist Frederic Bastiat wrote "The Candlemakers' Pet.i.tion," said to represent the interests of "the Manufacturers of Candles, Tapers, Lanterns, Candlesticks, Street Lamps, Snuffers, and Extinguishers" as well as "the Producers of Tallow, Oil, Resin, Alcohol, and Generally Everything Connected with Lighting."

These industries, Bastiat complained, "are suffering from the ruinous compet.i.tion of a foreign rival who apparently works under conditions so far superior to our own for the production of light that he is flooding the domestic market with it at an incredibly low price."

Who was this dastardly foreign rival?

"None other than the sun," wrote Bastiat. He begged the French government to pa.s.s a law forbidding all citizens to allow sunlight to enter their homes. (Yes, his pet.i.tion was a satire; in economists' circles, this is what pa.s.ses for radical high jinks.)

Alas, the prost.i.tution industry lacks a champion as pa.s.sionate, even in jest, as Bastiat. And unlike the sugar and steel industries, it holds little sway in Was.h.i.+ngton's corridors of power-despite, it should be said, its many, many connections with men of high government office. This explains why the industry's fortunes have been so badly buffeted by the naked winds of the free market.

Prost.i.tution is more geographically concentrated than other criminal activity: nearly half of all Chicago prost.i.tution arrests occur in less than one-third of 1 percent of the city's blocks. What do these blocks have in common? They are near train stations and major roads (prost.i.tutes need to be where customers can find them) and have a lot of poor residents-although not, as is common in most poor neighborhoods, an overabundance of female-headed households.

This concentration makes it possible to take Venkatesh's data and merge it with the Chicago Police Department's citywide arrest data to estimate the scope of street prost.i.tution citywide. The conclusion: in any given week, about 4,400 women are working as street prost.i.tutes in Chicago, turning a combined 1.6 million tricks a year for 175,000 different men. That's about the same number of prost.i.tutes who worked in Chicago a hundred years ago. Considering that the city's population has grown by 30 percent since then, the per-capita count of street prost.i.tutes has fallen significantly. One thing that hasn't changed: for the customer at least, prost.i.tution is only barely illegal. The data show that a man who solicits a street prost.i.tute is likely to be arrested about once for every 1,200 visits.

The prost.i.tutes in Venkatesh's study worked in three separate areas of the city: West Pullman, Roseland, and Was.h.i.+ngton Park. Most of these neighborhoods' residents are African American, as are the prost.i.tutes. West Pullman and Roseland, which adjoin each other, are working-cla.s.s neighborhoods on the far South Side that used to be almost exclusively white (West Pullman was organized around the Pullman train factory). Was.h.i.+ngton Park has been a poor black neighborhood for decades. In all three areas, the race of the prost.i.tutes' clientele is mixed.