Italy to Include Prostitution and Illegal Drugs in GDP

Bloomberg reports that Italy will now begin including its shadow economy in the country's GDP, in an effort to reduce the national deficit:

Italy will include prostitution and illegal drug sales in the gross domestic product calculation this year, a boost for its chronically stagnant economy and Prime Minister Matteo Renzi’s effort to meet deficit targets.

Drugs, prostitution and smuggling will be part of GDP as of 2014 and prior-year figures will be adjusted to reflect the change in methodology, the Istat national statistics office said today. The revision was made to comply with European Union rules, it said.

Child Trafficking and the Internet

Chatting with a seatmate on a flight, I learned she was attending a conference, hosted by Shared Hope International, on domestic trafficking in minor children. Naively and optimistically, I asked if this problem has been diminishing.  No, quite the contrary.  Why?  The reason appears to be economic, having to do with technological change and technology transfer.  With the internet, it is much easier to engage in transactions — nothing needs to be done face-to-face, thus reducing the risk to traffickers. Also, organized crime is getting involved since the trade is so profitable, as at-risk children can be traded repeatedly (unlike an ounce of crack cocaine). With some modifications, an established drug network can be used as a child-sex network.  Disgusting, horrible, and a negative side-effect of technological progress.  (HT: JM)

FREAK-est Links

1. Today in aptonyms: a trainer named Michael Jock. (HT: Stephanie D)

2. Certain homes in Gary, Indiana going for $1 a house -- but most buyers don't fit the qualifications. (HT: Dave McCall)

3. Drive-in "sex boxes" in Zurich designed to make work less dangerous for sex workers.

4. Consider the price of lobster: cheap at the bay this year, still expensive at restaurants.

5. Does birth order matter? (HT: Eric M. Jones)

Adventures in Ideas: Sex Workers of the World, Unite! An Interview With Maxine Doogan

Freak Readers, It is my distinct pleasure to introduce Maxine Doogan, from the Erotic Service Providers Union. I won’t offer a lengthy introduction —I’d embarrass Maxine! — because her words below say it all. Maxine has taught me a lot about prostitution and the sex trade in general. She has been instrumental in helping me craft my own research. Together, we hope to launch the first multi-city comprehensive research study of the sex economy. In a subsequent post, I’ll ask you for some feedback on that project. For now, I want to share her insights about the sex economy today. 

Q. Our readers might be interested in understanding exactly what you are seeking that might improve the economic conditions of sex workers? By the way, how you do you define "sex worker"?  

A. To improve one’s economics is to improve their lives and the larger communities. 

When the Economists Arrive, Do the Prostitutes Leave?

I was walking outside the American Economic Association meetings this past Sunday when a man stopped me and asked what all the university professors were doing in one place.  I told him that it was the annual convention of economists, and got a hearty laugh by telling him the old joke that when the economists arrived in town, the prostitutes left.  This joke is a good illustration: the arrival of economists represents a decrease in demand; the prostitutes’ leaving represents a decrease in the amount supplied.  I don’t know the shape of the supply curve, however, so I can’t speculate about the size of the change, if any, in the equilibrium price. But the joke does suggest that the equilibrium quantity transacted decreased.

Taxi Tipping and the Principal-Agent Problem

A reader named Matt Hasten writes in to say:

While in Las Vegas last week for a convention, I took a taxi between casinos (might as well see a few while making my contribution). When it came time to pay and I pulled out a credit card, the cab driver informed me that using a credit card would mean paying a $3 fee in addition to the fare ($11.50). This struck me as a ridiculously high surcharge and when it came time to tip the cab driver (all of this using the back seat electronic card reader), I did not add anything extra. My logic was that while I usually tip 20% on cab fare, that would have only been $2.30 and I already was paying $3 above the fare.

I explained to the cab driver that the money I would usually spend tipping him was instead paying for the $3 fee the cab company imposed on me. The cab driver, understandably, saw things differently and had some colorful wishes for the remainder of my evening. At the time, I felt justified not tipping because I felt the only way to make my displeasure known about the fee was to stiff the cab driver and hope his (and other cab drivers') anger of missing out on tips might put pressure on the cab company to change the policy. In hindsight, I do feel bad about stiffing the driver! I'm the kind of guy where you have to really mess up to earn less than a 20% tip at a restaurant.

I know the driver didn't set the $3 credit card fee, but taking it out on him by not tipping was the only way I saw to make my displeasure known or, better yet, impact a greedy policy.

Was I right to not tip?

Is There a Better Prostitution Policy?

Sam Lee of NYU and Petra Persson of Columbia send an e-mail:

We have written a research paper ["Human Trafficking and Regulating Prostitution"] that theoretically analyzes the impact of prostitution laws on voluntary sex work and sex trafficking. The central message of the paper is a new policy proposal (see Q6 below). Here are some of the questions we ask and the answers we find:

Q1: Which regulatory approach, legalization or criminalization, is more effective against trafficking?
A1: Neither. Either approach can increase or decrease trafficking, depending on the appeal of voluntary sex work, which in turn depends on things such as the female-male wage gap.

Q2: What about studies that document higher trafficking inflows into countries that legalize prostitution?
A2: In the presence of sex tourism (which is, for example, non-negligible for Germany, Spain, and the Netherlands), the increase in trafficking in the legalizing country can be more than offset by a decrease in trafficking in the neighboring countries. Thus, overall, trafficking can actually decrease.

FREAK-est Links

1. The Associated Press wants prostitutes to stay away from its D.C. bureau.

2. Are CEOs with military experience more honest?

3. The relationship between reading and being skinny.

4. Can exercise be bad for you? (HT: Eric M. Jones)

Some Links Worth Reading

1. C. Kirabo Jackson finds that college-prep programs -- with payments -- really do work for inner-city students.

2. The Stanford Technology Law Review digs deep into Intellectual Ventures' role as "mass aggregator" of patents; Business Insider's writeup: "It's an ugly business. But it's also perfectly legal."

3. A 3D printer that makes bowls and ceramics out of sand.

4. British medical students turn to prostitution.

The Economics of Prostitution, Belle Epoque Edition

Two French economists, Simon Porcher and Alexandre Frondizi, have been working on a paper about the economics of Paris street prostitution in the late 19th century.

In 1878, there were an estimated 23,000 unregistered prostitutes and 3,991 registered prostitutes. Gathering data from 339 arrests, the researchers found that street prostitutes were generally young, unskilled, and well-paid:

They tended to work with pimps that were from the same area and clustered in neighborhoods where they could compete with regulated brothels. Street prostitutes not only generated profits for themselves but also for a whole bunch of actors, thereby switching the whole local economy to this industry, at the expense of the formal economy.