Nicholas Kristof had a couple of articles that got me thinking about a paper I wrote on illicit labor market efficiency back in economics grad school. He wrote one article on sweatshops and one on prostitution. Would you believe he was for sweatshops? (Not that I necessarily endorse this view, Private Sector Development Blog gives another view.) Where do you think he stood on prostitution?
Well, ease your mind, I think Mr Kristof and I are both against prostitution, so you can keep reading.
Why is he for sweatshops? Sweatshops offend our charitable Western sensibilities … no one should work in such conditions. Mr Kristof, however, asks his readers to consider the alternatives: no job or worse conditions. On a macro scale, how can a poor nation become an industrialized trading partner if it doesn't climb up through the mire and muck of difficult working conditions and low wage employees? We did it once long ago. People choose to work at sweatshops because it's their best choice given their circumstances.
Economically, the choices people make are often assumed to be the most efficient choices for them – rational choices. People know what makes them better off. Sometimes we would prefer better for people who work in sweatshops, but there may not be better alternatives. Refusing to trade with countries that "exploit" labor means that those people who were getting exploited are now out of a job.
Pro-sweatshops, anti-prostitution.
So, why not prostitution? Even worse, travel to Poipet, Cambodia, or Mombasa, Kenya, among others, and you will find a high premium on child prostitution. Economists may argue, though, that measures to prevent prostitution, even for children, will just leave those poor people with even less choice and much worse conditions … starvation, violence, death.
My question, and my economics paper from before, is about the efficiency of slavery, prostitution, and other forms of illicit labor. Don't people make rational choices to maximize their own welfare, and if we mess with that, then do we mess them up? Is prostitution an efficient labor market outcome?
Some economic papers concerning such illicit labor markets suggest that the main objection to jobs like prostitution is moral repugnance. We don't like the thought of it. We would hope for something better. Economically, they claim, illicit job choices are efficient, prostitution is efficient; prostitution is the best (sic) choice for some young women and young boys.
Ok, here's the quick of it: endogenous choices. The decisions that, say, prostitutes make are based on a predetermined game … where they lose. The idea is that, yes, if people choose a job then it must be their best alternative. If you ban prostitution, it doesn't help prostitutes, they'll just starve now. But here's the thing, what if prostitution is their best choice because someone has restricted their choices? – and therein lies the problem.
Forgive me here, but I'm reading a book on game theory, so let's construct a game:
First, let's simplify. All women in Mombasa can choose between two jobs, basket weaving and prostituting. All employers in Mombasa can choose to be good (respect their workers and pay fair wages) or choose to be bad (take advantage of their workers for higher profit). The chart above shows the payouts to employers in the upper right of each square, and the payout for women is in the lower left square. A payout of 4 is great; a payout of 1 is pretty poor.
Scenario A) Let's say that all employers in Mombasa are good (left column). Now the only choice is what work women prefer if employers are good. Women will prefer a payout of 4 instead of 3, so if all employers are good, women prefer basket weaving. Even if prostituting involves making more money, the payout for women may include more than just money, payout can be dignity plus income. Basket weaving wins out.
Scenario B) If every single employer in Mombasa is bad (right column), then women will prefer to prostitute because their payout is 2 instead of 1 for basket weaving. This may be the case because bad employers take advantage of all of their workers, but prostitutes can bring in more than weavers so there's a bigger take for the women to prostitute.
So the choice of basket weaving or prostituting, for the women, depends on whether all employers are good or all employers are bad. In a perfect world, however, the best a woman can do is 4, so any woman would ideally want to weave baskets for good employers.
What about the choices for employers?
Scenario C) Let's say that all women weave baskets (top row). Now the employers must decide: should I be good or should I be bad? If all women weave baskets, being good gets an employer 2 and being bad gets 3, so the employer will prefer to take advantage of her employees and be bad. Scenario D) What if all women are prostitutes (bottom row)? Well, the employer still gets a better payout for being bad, 4 to 3.
Note here that employers will choose to be bad, take advantage of employees, and receive a bigger payout regardless of whether women weave or prostitute. In game theory, this is called a dominant strategy: when one player has a choice that is always better than any other choice that player could make regardless of the other players' choices. Dominant strategy does not mean best overall outcome, just that one player has a choice better than all of that player's other choices no matter what others do.
If employers have a dominant strategy to be bad, they're going to be bad. If employers are always bad, we know that it is better for women to choose prostitution, as in Scenario B above.
Just because women choose prostitution, it doesn't mean that prostitution is an efficient economic outcome (much less an efficient human outcome).
The best choice for a woman in our model above is by far to weave baskets. Prostitution is simply the best choice given that the game is rigged against them.
The model above is very simplified, so what are some ways that the game is rigged against women or children or the poor and vulnerable? … Education, social stigmas, discrimination, AIDS, slavery, corruption, sexism, drugs, vicious circles of poverty.
Prostitution is bad, and repugnant. Do we fight to ban prostitution at the expense of the very poor? Mr Kristof wants to see brothels become unprofitable through systemic changes. Where illicit labor markets prevail, the economic, social, and justice systems are broken; so how can we see prostitution become a bad choice and how can we restore women's best choices?
Further Reading
Kristof, Nicholas. 2009, January 10. "Striking the Brothels' Bottom Line." New York Times, Op-Ed.
Kristof, Nicholas. 2009, January 14. "Where Sweatshops Are a Dream." New York Times, Op-Ed.
Dixit, Avinash K. and Barry J. Nalebuff. Thinking Strategically: The Competitive Edge in Business, Politics, and Everyday Life. London: Norton, 1993.
Imperfect Outcomes for Illicit International Labor Markets: short bibliography.
