Nov 30, 2008

The Financial Crisis Down Under

Hey all

I was just reading the online edition of my local newspaper back home in 'The Land Down Under', and I came across this article about a perhaps little considered impact of the financial crisis.

Forget financial markets in a tailspin and home mortgage foreclosures, one of the big impacts of the financial crisis in my home city of Sydney is apparently on the sex industry. According to the article, 'Financial Crisis Forces More Women Into Sex Industry', declining incomes and tough economic conditions are forcing more women to working in legal and illegal brothels.

But an additional effect of the financial crisis is also that declining fortunes in the financial services industry are leading to declining incomes for the regulated sex industry in general, as businessmen tend to substitute cheaper (illegal) services for the midrange ones they usually purchase (and they are also tending more towards organising their rendezvous at zero cost via the internet).

It is interesting that this reveals that consumers regard the purchase of sexual services as a necessity, rather than a luxury, service. The stylised fact that businessmen substitute cheaper for more expensive sexual services during times of declining income, rather than go back to their wives, would also support the contention from this JPE paper by Edlund and Korn (2002) that prostitutes offer men a different 'good' (nonreproductive sex) to that offered by their wives (reproductive sex).

In any case, my two cents as far as the 'theory of prostitution' a la Edlund and Korn (2002) goes is that it's a load of rubbish - yet another stupid attempt to apply Beckeresque rational actor models to areas where Economics should really just stay away from (although for saying this I will probably be exiled from Rigot, stoned, and burnt at the stake for being a heretic......). So what if they got it published in JPE anyway??

And of course it's terrible that increasing numbers of Australian women are being forced to supplement their incomes by selling their bodies - apparently this phenomenon is especially prevalent amongst the Australian student population.........something to think about when we whinge about our measly scholarships and TA salaries, I guess.


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