Sunday, August 1, 2010

Trading Tricks The Economics of Prostitution

Research by Steven D. Levitt

Steven D. Levitt is William B. Ogden Distinguished Service Professor in Economics and the College at the University of Chicago

Capital Ideas
April 2009

Despite being called the oldest profession in the world, little is known about how this unique market works. A recent study sheds light on the business of selling sex in the city of Chicago and finds that it is much like any other business.

Most crimes involve a victim and a perpetrator. The perpetrator typically looks for his victim and the victim avoids the perpetrator as much as he can. The crime of prostitution, however, is quite different. There are two parties involved but it isn’t clear who the perpetrator is and who the victim is. Moreover, it is in the interest of both the prostitute and the client to do their best to find one another. As a result, prostitution operates just like a market: it is populated by buyers and sellers who mutually benefit when they come together to perform a transaction.

Interesting questions emerge when one thinks of prostitution as a market, but there is surprisingly little research on the economics of this particular profession. How do prostitutes and their customers, or “johns,” find one another? How much do prostitutes charge for a service, or “trick,” and how is that price negotiated? If a john prefers not to use a condom, how much more does he have to pay? How does a prostitute’s wage compare to what she earns for doing other jobs? What happens when there’s a sudden surge in demand for prostitutes, and how do prostitutes meet this demand? The difficulty of obtaining reliable data is partly to blame for the dearth of empirical analysis on the subject.

In a recent study, “An Empirical Analysis of Street-Level Prostitution,” University of Chicago professor Steven D. Levitt and Sudhir Alladi Venkatesh of Columbia University uncover intriguing answers to these questions by using publicly available information from the Chicago Police Department and, more importantly, detailed and real-time transaction data for over 2,200 tricks performed by about 160 prostitutes in three Chicago neighborhoods that the authors collected with the help of pimps and prostitutes. The bulk of this massive data undertaking was done by trackers who were hired to follow prostitutes for two years. The trackers are mostly former prostitutes. They stood on street corners and sat in brothels, recording valuable information on every trick performed immediately after a customer left. Embedding data trackers in the daily activities of prostitutes and collecting data in real time has the potential to generate more accurate information than standard survey methods. “The prostitutes know the data collectors, trust the data collectors, and hopefully will be honest with the data collectors,” Levitt says.

The study offers a rare glimpse into the business of prostitution, as well as a unique window to view the workings of the inner city of Chicago that may have been difficult to reveal otherwise. “In the end, our study is not just about prostitution, but also about the lives of the people of the inner city,” Levitt says.


Read the unpublished working paper

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