ProstCost – Part 2 of 3: Counting the Cost

This is my second post discussing the recently publicized ProstCost study by Le Mouvement du Nid which claims prostitution costs France 1.6 billion euros per year. In Part 1 I discussed the key missing figure from the study: The economic benefits of prostitution. I also listed some important caveats which apply to this post as well.

Now I’d like to discuss the costs described in the study. I should warn you, this will be getting into the weeds.

Before that, however, I want to discuss a cost that the study never directly addresses: The production cost of prostitution, as paid by the sex workers themselves. This includes not just financial out-of-pocket costs, but also the time value of the sex worker’s labor and any costs in the sex worker’s quality of life. That cost would be difficult to determine directly, but we can once again use the economist’s trick to set a bound.

Going back to that $50 steak dinner from the previous post, how much do you think it costs the restaurant to prepare and serve it? Well, just as you wouldn’t buy it unless it was worth more than $50 to you, the restaurant wouldn’t sell it for $50 unless it cost less than that to make. $50 was the lower bound of its value to you, but it’s the upper bound of its cost to the restaurant.

Except in the degenerate case where both you and the restaurant value the steak at exactly $50, the steak is being transferred from an owner who puts a value of less than $50 on it to an owner who puts a value of more than $50 on it. For example, it might cost the restaurant $45 to prepare the steak, and you might be willing to pay $60 to eat it. When you buy it for $50, the restaurant gets $50 for its $45 steak — a $5 gain — and you get a $60 steak for $50 — a $10 gain. That’s a combined net gain of $15. You have made the world $15 richer. This is the economic benefit of trade.

And just as we estimated the benefits of prostitution to be at least € 3.2 billion per year, we can estimate that the production costs must be at most € 3.2 billion per year. The difference between the production cost and the value to the consumer is the economic social gain from prostitution, at least for those participating in it.

That’s not quite the whole story. Even though clients gain more than sex workers lose, it’s possible there are third parties who experience losses that outweigh the gain. That’s the implication of the ProstCost study, and we ought to take a closer look at it.

The ProstCost study breaks the costs out into six main categories. The first one I want to look at is “Human costs for people Prostitutes.” (Because I’m using Google Translate to get the category names, I’m going to quote them as a reminder that the translation is shaky.) This is where the study tries to estimate equivalent financial amounts for non-financial costs. Here’s the list:

Some commentators are concerned that the study assigns financial costs to very non-financial harms like rape and murder. I understand why that creeps people out, but it’s really the only way to answer or even ask these kinds of questions: You have to have some way to compare costs and benefits, so you have to translate them to a common measurement. People have always been willing to risk their well-being for money or the things that money can buy, and we have some idea how they make those tradeoffs, so we have some reasonable methods of assigning financial costs to these kinds of risks.

A more troublesome issue is that this category is counting crimes against sex workers as a cost of prostitution. We see this attitude with some other crimes, where victims are punished for making themselves vulnerable — from cops ticketing people who leave their cars unlocked to efforts to shut down bars where fights break out.

Furthermore, it’s arguable that much of this crime against sex workers is exacerbated by the criminalization of prostitution and related activities. It makes sex workers reluctant to report even serious crimes to police — because police might decide to arrest them — and it discourages business practices that would make them safer, such as keeping records, installing security cameras, and hiring people to protect them.

The fundamental problem with the study’s approach, however, is that including these costs makes no sense because these costs are borne entirely by the sex workers themselves under the € 3.2 billion cost cap I calculated above. Sex workers are smart enough to take these costs into account when deciding to do that kind of work, and therefore the ones doing that kind of work are those who have accepted the costs in return for the benefits.

A similar cost category in the ProstCost study is “Direct costs Medical (Cost of health),” which is estimated at € 85 million per year. The study says these estimates are for costs “specifically related to prostitution,” and I’m going to assume that € 85 million is (as it should be) only the excess cost of medical care for sex workers over and above that of other people in the same demographic.

If this was in the United States, I would lump medical costs into the previous category because they would be borne directly by the sex workers themselves. Because this is France, however, some of those costs are covered by national health insurance, which makes them a cost born by the French public.

Another similar category is € 58 million for “Cost implications direct social” which is, from the looks of the individual items, a collection of social welfare programs. Assuming again that these numbers are estimates of the excess costs — the costs of sex workers compared to the population average costs — then they are legitimate costs borne by the French public.

What’s less clear about these costs is which way the causality is flowing: It’s not clear that prostitution causes poverty. Certainly some desperately poor people have turned to prostitution as a way to survive, but in that case it’s the poverty that’s causing the prostitution. In fact, the prostitution income is probably reducing social welfare spending.

More generally, it seems likely that poverty and prostitution have co-factors — conditions that make it hard to hold a well-paying regular job, but which are less of a problem for people doing sex work — lack of education, mild mental disorders, substance abuse, medical problems, single parenthood. If French sex workers are disproportionately likely to face such difficulties, that could create a correlation that the study would detect.

Another category is “Direct non-medical costs,” which consists of “Administration penitentiary,” “Activities police and gendarmerie,” and “Activities criminal Justice,” which are estimated to cost € 35 million per year. In other words, part of the cost of prostitution, according to the study, is the cost of enforcing the laws against prostitution (or related activities like solicitation and pimping).

That’s not quite as crazy as it sounds. When counting the social cost of a crime, it is standard practice to count the cost of preventing the crime. The social cost of burglary includes not only costs imposed by burglars on their victims, but also the costs paid by society to prevent burglary — door locks, alarm systems, security guards, police detectives, and so on. It’s not just the cost of burglary, but the cost of living in a society that has burglars in it.

The catch is that this kind of analysis assumes the activity in question is a crime, so it’s not applicable when you’re trying to decide whether something should be a crime. That would be assuming the conclusion. And if you never make prostitution a crime, you never have to pay the cost of punishing people for it.

One of the more baffling categories is “Cost of traffic money money prostitution” (honestly, that’s how Google translates it) which appears to be tax evasion, broken down like this:

I know I said I wouldn’t get in to data quality issues, but reading the translation, I can’t for the life of me figure out how they estimated this, even assuming they have a good estimate of the number of prostitutes or how much money they make.

I’m also confused by the fact that the study authors divide the estimated spending on prostitution, € 3.2 billion, by the estimate of 37,000 working prostitutes to get an average annual earning per prostitute of € 85,700. As near as I can tell, that is more than double the median household income in France, which made me question the study’s figures for the burden of prostitution on social welfare programs.

Looking at some diagrams in the original summary, I see they are saying that of the € 3.2 billion in gross prostitution earnings, about € 1.4 billion of it goes to “pimps.” I assume that when they say “pimps,” they are talking about the sex workers’ business operating expenses, which may include a payment to what we usually think of as a pimp, but may also include things like agency fees, advertising, drivers, hotel bills, and apartment rentals. This would still leave € 1.8 billion for the prostitutes, meaning the the average prostitute’s take-home pay is roughly the same as the median household income, which still conflicts with public aid costs. (I suppose there could be distributional issues that make it all make sense.)

The French tax burden is really high, so it’s plausible tax evasion could amount to more than 25% of income. Sex workers probably earn most of their money in cash, so hiding the income wouldn’t be difficult. In fact, they’d probably have the opposite problem — figuring out how to report the income and pay taxes so they can put the money in a bank and spend it in ways that would be visible to tax authorities.

Of course, if sex workers can work legally, they’d probably have to behave more like regular businesses, which would make it harder to evade taxes. Besides, it’s hard to blame them for not paying taxes when honest reporting would likely get them arrested for a victimless crime. Tax evasion is both enabled and encouraged by the criminalization of prostitution.

In any case, just as it doesn’t make sense to hold sex workers responsible for the costs of law enforcement, it doesn’t make sense to hold sex workers responsible for the effects of France’s tax policy.

This section of the summary also sees fit to mention that 45% of the money earned by prostitution is sent out of the country. They don’t say how the money is sent (or how they could possibly know about it), but I think we’re supposed to imagine some sort of shadowy international trafficking ring. I’m guessing that in reality it’s mostly remittances — immigrants sending money to family back home.

I don’t know why the study authors consider this a problem. It may be that money earned by (for example) Romanian sex workers in France is flowing out of France to their families in Romania, but in return French men get to have sex with Romanian sex workers. This is called international trade, and it’s usually considered a good thing.

The most confusing section is titled “Costs aftermath indirect social,” which is broken out this way:

I have no idea what “Placing children” means here, and the Google translation isn’t clear, so just for the sake of argument, I’m going to assume it’s a real social cost of prostitution.

As for “Homicides/Suicides,” I’ll summarize what I said above: To the extent that these are due to prostitution, they are risks assumed voluntarily by the prostitutes. Furthermore, the correlation between suicide and prostitution is not proven to be caused by prostitution; there could be confounding co-factors that cause both. Finally, at least part of the homicide rate is probably due to sex workers’ adversarial relationship with the police and the resulting loss of personal security due to the need to work in secret.

Finally, I’m saving the most infuriating cost for last: “Losses production due to incarcerations.” In other words, we’ve thrown people involved in prostitution in jail, and now we’re going to blame them because they aren’t holding down a job. By any sane accounting, this is a cost of criminalization.

So what is the cost of prostitution in France? Here’s how the costs in the study sort out according to the categories I’ve been using:

Of these, only the public costs go into the benefit-cost calculation for prostitution, which leaves us with external costs totaling € 202 million.

In the third and final part, I’ll add a few more details and try sum it all up.

Update: Part 3 is up.