Category Archives: Vice

Addicted to Harlotry — Part 3: Capital Investment

In Part 1, I introduced the concept of rational addiction and argued that failure to account for it causes us to underestimate the benefits that other people receive from certain activities, which may lead us to believe that there is something unnaturally wrong about their high levels of consumption.

Then in Part 2, I explored the ideas of a supply-side version of rational addiction in which past production of some good or service makes it less costly to engage in future production of that good or service, using as an example the difficult job of caring for the very sick and elderly.

Please join me now for the thrilling conclusion.

You’ll notice that I started out talking about the demand for goods like video games and heroin, but now I’ve switched to talking about the supply of labor for nursing and firefighting and prostitution. The idea of extending rational addiction and intertemporal complementarity to the supply side is an idea I came up with on my own. It’s a pretty obvious extension of some basic economic ideas (economists often extend theories of consumption to things we don’t usually think of as consumption), and I don’t think it would be controversial, but I wanted to try to find actual economists saying something similar.

It took me a while. My research skills don’t go much beyond Google, and I didn’t have much luck at first. Searching for obvious things like “economics of prostitution and rational addiction” got me a lot of hits for stories about drugs addicts who engage in prostitution to feed their habit. I didn’t do much better when I stretched my knowledge of economic jargon to search for phrases like “prostitution and intertemporal complementarity” or “intertemporal cross-elasticity of supply.”

Eventually, I did stumble across what I was looking for, and really, it should have been obvious.

It’s common to use the word “capital” to mean money, as in capitalizing a corporation, but to an economist, capital refers basically to tools. That is, to the things we make in order to improve our ability to make other things. To a baker, capital is the kitchen and cooking utensils. To an airline, capital is the airplanes and all the associated airport facilities and service equipment. To a web publisher, capital is the website hardware and software.

(Note that capital goods are not consumed in the process — that would be raw materials — and things like land are not capital goods because we don’t have to produce them.)

Because capital goods have to be produced, however, they take away from production of consumer goods. So every business has to decide what capital it needs to achieve the desired level of production, and it has to expend effort to first produce (or spend money to buy) capital goods before it can produce the consumable goods it will sell. You have to have a kitchen before you can bake some bread, you have to buy airplanes before you can sell travel tickets, and you have to build a website before you can monetize page views.

Because the stock of capital must be accumulated at some cost before it can be used to produce the salable goods and services, it is an investment. This is why money invested to start or grow a company is called “capital”– it’s used to buy or build the real economic capital.

Much of the reason we in the industrialized nations live so much better than the rest of the world is because we have accumulated a huge stock of capital. Here in the United States, we produce $11 trillion in consumer goods annually because we have an estimated $28 trillion in private and government-owned capital.

But there’s more to capital than just what is owned by business and government. Economists consider many personally-owned durable goods to be personal capital, in that we don’t consume them directly but we use them to produce other goods and services that we consume. Cars produce transportation, refrigerators and stoves produce meals, and homes produce housing. To account for this, we have to add another $22 trillion in residential assets, bringing the total stock of U.S. capital to about $51 trillion.

Even that figure is only a fraction of all the capital in the U.S., because not all capital is physical goods like factories and airplanes and homes and cars. Some capital is intangible.

Consider why a surgeon makes far more money in a day than most other laborers: Because he knows how to perform surgery. That’s a skill he acquired by paying for an expensive education and spending a great deal of time training. Developing the ability to perform surgery required a sacrifice, an investment of money, time, and energy that could have been spent on other things. But having made that investment, he now profits from being able to produce an incredibly valuable service. In other words, a surgeon’s training and skill is a form of capital. It’s an example of what economists call human capital. Indeed, to an economist, a surgeon consists of little else but human capital.

Because it’s intangible, human capital is kind of a squishy concept. You can see physical capital like airplanes and factories and tools, and you can trace the transactions involved in its purchase or construction, but human capital is created and forever invisibly encoded in the mysterious convolutions of the human brain. This makes it less obvious than it probably should be. But just because it’s impossible to see doesn’t mean it’s any less real.

Estimation of the stock of human capital is difficult because it doesn’t show up in most accounting records — it has to be deduced from other numbers and from estimates of its effects — but by all estimates the U.S. stock of human capital is gigantic. I found a study from 2006 that estimated the U.S. stock of human capital was an incredible $212 trillion — more than four times the current stock of physical capital. As much as our way of life in the U.S. benefits from our accumulation of capital, most of that capital is held in the minds of our people. We live as well as we do because of what we’ve made ourselves into.

And some of us, to bring this post back around, have made ourselves into people who can tolerate unpleasant jobs.

If you take on work that others consider unpleasant because it simply doesn’t bother you, then you are exploiting your personal natural resources. Just as people with good voices can more easily become singers, people with a limited sense of smell can more easily become garbage collectors, and people who don’t mind having sex with lots of strangers can become happy hookers.

But if you take on work that others consider unpleasant because you have become used to it through experience, then your tolerance for that unpleasant job is the result of an investment in your human capital. Like any other investment, it comes at a cost, partly of time and energy, but also at the cost of enduring the initial unpleasantness needed to build up tolerance. The logic for this is the same whether you’re a nurse getting used to the burden of caring for sick people, a fireman running into burning buildings, or a prostitute having sex with strangers.

I’ve been playing a bit fast and loose with the definition of rational addiction, in that I’ve mostly been talking about the effects of intertemporal complementarity, the mechanism by which present consumption makes future consumption more beneficial. But rational addiction is more than that. The theory of rational addiction assumes that people are aware of the phenomenon of intertemporal complementarity and take it into account when making decisions. That’s what makes it rational.

Engaging in certain types of “addictive” behavior is a rational thing to do. From the first time our parents convince us to try some new type of food, or take us somewhere we don’t want to go and tell us we’ll make friends there, aren’t we always finding ourselves in situations where perseverance pays off?

The rational nature of these kinds of decisions is especially clear if we switch to the supply-side view and think in terms of investment in personal human capital. We go to school so we can start careers, and we take crappy jobs so we can learn skills to get better jobs. We take music lessons so we can play an instrument, we exercise so we’ll have better health, and we take a thousand falls off surfboards so we can learn to ride the big waves.

I should conclude by pointing out that I can’t actually prove any of this. In my defense, I’m not really describing a theory so much as a point of view based in some not-terribly-controversial economic theories. The scientific question would be whether those theories actually apply to prostitution. It’s hard to imagine that they don’t, since they have been shown to apply to just about everything else, but given the illegal and hidden nature of prostitution, it seems nearly impossible to get the kind of data you’d need to prove it.

For example, if it becomes known that prostitution will be less profitable in the future — either because it will cost more or pay less — then these theories both predict that prostitution should begin dropping off immediately, either because rationally addicted prostitutes will face a reduced value of future prostitution, which by intertemporal complementarity means that present prostitution will also be less valuable, or because prostitutes who are investing in their ability to tolerate unpleasantness will be facing a reduced return, discouraging that investment.

Even if given a natural experiment, such as a jurisdiction deciding to increase the penalty for prostitution (thus raising its cost for prostitutes) at some point in the future, it would be difficult to distinguish the effects of rational addiction or human capital investment from other effects, such as prostitutes who switch to other work early because they don’t want a period of unemployment, or who work harder to build up a savings buffer before the costs go up. It’s hard enough to do those kinds of studies when everything is out in the open with honest bookkeeping.

So what’s the point of all this? If you’ve stuck with me through all five thousand or so words, you may have been wondering if I have a point. I think I have a few of them.

The first point is that I like thinking about stuff like this. I warned you up front that this would be a one of my long thinking-out-loud pieces. I’ve meandered from prostitution to addiction to video games, and linked them all together with my understanding of some economic theory. I also managed to tie in some national capital stock accounting and a couple of personal stories about a difficult time in my life. It’s the kind of thing I enjoy reading, and I certainly hope you do too.

(If not…sorry. I’m planning some cat blogging later.)

My second point is that there’s nothing special about how and why most women become prostitutes. You don’t have to assume that prostitutes are brainwashed and turned out by evil pimps in order to explain how they get into the profession or why they stay in it. Ordinary theories of economics seem to offer reasonable explanations. Economists have long been making similar findings with regard to illegal drug dealing — once you find a way to convert the risks of prison and street violence into equivalent dollar costs, drug dealers make risk-vs.-reward decisions just like every other economic actor — and I expect that similar results would be found in detailed studies of the economics of prostitution. As Maggie McNeill often argues, prostitution is not much different from other jobs, except for the sex. And getting arrested.

My third point is that I think a lot of people don’t get the second point. The phenomena of being “turned out,” of becoming numb to the horrors, and of getting caught up in “the life” are not unique to prostitution, and getting used to unpleasant work is not evil in and of itself. Failure to realize this leads to believing in nonsense such as “false consciousness,” brainwashing, and ubiquitous-yet-hard-to-find human trafficking rings.

My fourth point is that I suspect our attitude towards people with chemical addictions influences our attitude towards people with rational addictions. After all, both types of addiction produce similarly unusual behavior as seen from the outside. Depending on our views, we may think of junkies and alcoholics as either morally weak or tragic victims, so it’s not surprising that many people take the same view of video game addicts and sex workers.

Re-reading all this, I should probably clarify that I’m not saying that prostitution is a good thing for women, and I’m not encouraging more women to become prostitutes. The economic theories I’m talking about are positive, not normative. They depend on no moral judgement. If I’m right, they describe what happens, but they are in no sense a prescription for what should happen.

Even the staunchest advocates for sex workers agree that prostitution is not for everyone. Some prostitutes may find it liberating, but for many others, it’s just a way to pay the bills. And for most women, it’s something they’ll never do. I can’t possibly decide what would be best for any woman. As a libertarian, of course, I would leave that decision entirely up to her.

The Harlot’s Addiction — Part 2: Difficult Jobs

In Part 1, I introduced the concept of rational addiction and speculated that failure to account for it causes us to underestimate the benefits that other people receive from certain activities, which leads us to believe that there is something unnaturally wrong about their high levels of consumption.

A recent example of this is NRA President Wayne LaPierre’s diatribe against video games. I don’t know if LaPierre is serious or merely spouting nonsense to distract from the gun issue, but I’ve heard other people express similarly intolerant views. It’s not hard to see how someone who doesn’t have an interest in video games would conclude that people who play them constantly are deranged — maybe even dangerously so. They don’t understand why it’s a rewarding experience, so they denigrate it and are willing to see it restricted by law.

Which is a pretty stupid thing for the head of a gun-rights organization to do, considering that some folks in the anti-gun crowd do the exact the same thing when they accuse gun owners of paranoia and extremism.

Inter-temporal complementarity works when past consumption increases the net benefits of future consumption, which can mean increasing the benefits or reducing the cost. To people who aren’t familiar with guns, there is a considerable psychic cost to gun ownership, including a not unreasonable fear of injuring themselves or others, so when they imagine buying a gun, they imagine doing so only when they have a dire need for self-defense. However, they make a mistake when they assume that gun owners face similar costs. Because those high costs would make it worthwhile to have a gun only if they were in extreme peril, they assume people want to buy guns because they believe themselves to be in extreme peril, and since no such peril is evident, they conclude that gun owners must be paranoid.

Many gun owners, however, grew up with guns or have become familiar and comfortable with them, so they incur no more psychic penalty for gun ownership than they would for other hazardous implements such welding torches, lawn mowers, or power tools. They want to own guns not because their paranoia has overcome their common sense, but because their common sense tells them there’s little cost to doing so. In terms of this discussion, they have become rationally addicted to guns.

And because rational addiction depends on the net benefit, it doesn’t just apply to the demand side of the market. Just as we can use intertemporal complementarity to explain seemingly high levels of demand for goods and services that appear to to have little value to outsiders, we can also use it to explain high levels of supply for goods and services that appear unpleasant to produce.

I experienced something like this a few years ago when my mother died, and I suddenly had to start taking care of my bedridden father. I discovered that there were all kinds of special steps for preparing his food, maintaining his oxygen equipment, giving him his medications, and dozens of other things I had to do to take care of him. Cleaning up my father’s soiled clothing and bedlinen was downright repulsive. And no matter how hard I worked, my father was always complaining about something. The job of taking care of him was difficult, disgusting, and thankless.

Since I couldn’t afford to take care of him full time, I began looking for a good nursing home. And as I read up on the subject and visited potential homes for him, I met a lot of the staff, and I found myself wondering what the hell kinds of people chose do this for a living? Were they saints? Or were they just crazy?

Skip forward a few months, however, and my attitude had changed. I had worked out efficient ways to manage my father’s life, and the tasks I had found repulsive were now just part of my day. The complicated process of taking care of my father had become a matter of routine. And although my father was as cranky as ever, I had stopped taking it as a personal rebuke. In economic terms, my prior “consumption” of my care-giving labors had reduced the costs I was experiencing. Taking care of my father became something of a rewarding experience, and I appreciated the chance to spend so much time with him before he died.

And now that I had gained some experience, I no longer viewed nursing as the work of either saints or crazy people. Although it wouldn’t be a good fit for me, I now had some understanding of how professional nurses could learn to manage the effort and get accustomed to the unpleasantness, allowing them to make a career out of taking care of the elderly. I had experienced a bit of rational addiction for myself, which gave me the insight to see it in others.

I suspect this is a common path into the caring professions. One day when I was at my favorite pizza joint picking up an order, I got to talking with one of the servers about about the situation with my father, and she told me she had recently taken care of a close family member in hospice care and had since taken CNA training to turn care-giving into a career. We immediately hired her, and she made a huge difference in all our lives.

It seems likely to me that she went through the the same process of adaptation that I did, except that she went a lot further and turned it into a career. In economic terms, she had become rationally addicted to caring for the old and infirm, an activity that many people, including myself just a few months earlier, would have found repulsive.

This seems like a pretty common phenomenon that must apply to a lot of jobs that are difficult or unpleasant — firefighter, nurse, police officer, miner, soldier — which brings me back to Maggie’s concerns about prostitution:

…what I’m saying is that the anti-whore crowd wants to pretend sex work is something people get drawn into by malefic forces (just as so-called “addicts” are supposedly drawn toward their obsessions), when in fact both are cases of people choosing the most attractive of the available options.  The majority of sex workers choose sex work from a number of valid options, and even women of high opportunity cost (those with degrees and other advantages) consider it a rational economic choice…

It’s not hard to see how rational addiction could help explain why women become prostitutes and why they are so often misunderstood.

I think it’s safe to say that most people find the idea of working as a prostitute a bit disturbing. For most women, having impersonal sex with an unending stream of strange men probably sounds like a repulsive way to make a living. And it probably would be for them, at least at first. But it seems likely to me that many prostitutes become rationally addicted to prostitution. Like a healthcare worker who gets used to changing diapers on bedridden patients or a firefighter who gets used to running into burning buildings, they have become used to the hardships of prostitution.

As I mentioned earlier, this is not about a difference of tastes. From what Maggie and others have written, it’s clear that some prostitutes really are happy hookers — having sex with lots of different men is a defining part of their exciting and adventurous lifestyle, and they wouldn’t have it any other way. That’s great for them (and for their lucky clients) but rational addiction doesn’t depend on a this difference in tastes. Rational addiction can work on anyone who gives prostitution a try, and learns to like it as a job.

This is often portrayed in a very negative way by people who oppose prostitution in the name of protecting women. They describe experienced prostitutes with loaded terms such as “numb” or “deadened,” and anyone who helps them through the acclimation process is said to be “turning them out.” You rarely hear that kind of loaded language when discussing, say, nursing assistants who give sponge baths to 90-year-old invalids or police officers who patrol in dangerous neighborhoods.

Just as outsiders assume that video gamers are obsessive or gun owners are paranoid because they don’t understand the costs and rewards, and just as I thought people in the nursing profession must be either saints or lunatics, so people who look at prostitutes from the outside often make up stories to explain their behavior. They know that they would hate having to engage in prostitution, and they assume everyone else would hate it too. From that false premise it’s a simple deductive step to a dangerous conclusion: If all women hate having sex with strangers for money, but some women are doing it anyway, then someone must be forcing them into it.

Once they’ve rejected other possibilities and latched onto that conclusion, it colors their view of everything else. When faced with “freed” prostitutes who return to the life, they assume that these women must be damaged or brainwashed, and when faced with ex-prostitutes who speak well of sex work, they call them liars. Knowing that they would never consent to be a prostitute, they deny the agency of all prostitutes, robbing them of their right to make decisions about their own lives.

Next post: Prostituting yourself as an investment.

The Harlot’s Addiction — Part 1: Rational Addiction

A few weeks ago, Maggie McNeill, the Honest Courtesan, wrote about the use and abuse of the word addiction:

The belief that people can become “addicted” to things that do not produce chemical dependency (food, sex, the internet, etc) is fallacious in two ways.  The first, which we have discussed before, is a confusion of the concept of addiction (physical and psychological dependence on a substance which affects biochemistry in such a way as to render normal physiological function impossible without the substance) with the related concepts of habituation (psychological reliance on a substance which is not physiologically addictive) and obsession (psychological fixation on a behavior).

Maggie goes on to make the point that some people who want to save women from prostitution treat them as if they were addicts, denying their personal agency and freedom. This struck a bell, and reminded me of an interesting economic theory I’ve heard about, so I started to write one of my thinking-out-loud posts about it, and I ended up with enough speculations and conjectures to fill several posts, of which this is the first.

I’m going to have to deviate from Maggie’s purist usage of addiction, however. In some contexts, it’s common to limit addiction to chemical dependency as Maggie does, but in typical usage it has a broader meaning, and I think that broader meaning is more useful. I’d rather use addiction to describe the behavior, and use terms like habituation and chemical dependency to describe the reason for the behavior.

In any case, when I talk about addiction in this series of posts, I’m talking about any behavior that appears to be habit-forming or compulsive.

Economists have some difficulty analyzing the concept of addiction because it appears to overturn one of the critical assumptions of economics: That people rationally choose to consume more of things they think will improve their lives. But that assumption doesn’t seem to apply to addicts in the usual sense who are, almost by definition, engaging in behavior that is causing them harm, which seems to conflict with the idea that they are rational agents.

It would be easy to explain addiction by assuming that addicts are indeed irrational, but that answer doesn’t satisfy economists because it explains too much. You can explain any human behavior you don’t understand by declaring it irrational. And that’s no explanation at all. It’s certainly not an explanation you can verify with experiments and studies.

Economists have tried a number of ways to address the problem of addiction without completely abandoning the assumption of rationality, but the one which interests me here is the theory of rational addiction, which attempts to explain addictive behavior by assuming that under certain conditions past consumption will increase the benefits of future consumption. For example, first-time marijuana users often find it unpleasant, but if they keep trying marijuana, they eventually get used to it. Having used it before, they now gain greater benefits from using it again, so they use it more and more.

This is a special case of what economists call complementary goods, which are goods that make each other more useful to consumers, so that an increase in consumption of one leads to an increase in the other. For example, high-def video players are more enjoyable if you have a big-screen television, and big-screen televisions are more valuable if you have a high-def video player, so the sales of both tend to increase together, which makes them complementary goods. Other examples are peanut butter and jelly, hamburgers and french fries, and gin and vermouth. We say that all these are complementary goods. Rational addiction results from inter-temporal complementarity, in which consumption of a good is complementary to consumption of the same good at a later time. Consuming more of the good today leads to consuming more of the good tomorrow.

This doesn’t seem like a good explanation for all addictive behavior — it’s hard to see how heroin addicts living in the streets could really be pursuing a rational addiction. Nevertheless, as with many counter-intuitive economic theories, it has produced a some successful predictions under surprising circumstances. And I think it could be a good explanation for the more figurative forms of addition.

Consider the malady of “video game addiction,” which many serious people pretend is a real thing, at least when they can make money off of it. Although such behavior could be a sign of a mental disorder — people can become obsessive about anything — it strikes me as far more likely to be a case of rational addiction. Video games are often difficult and confusing to play at first, leading to a frustrating experience, but players who keep at it long enough will become good at the games and learn to appreciate the artistry, technology, and style of the games, so they enjoy them a lot more.

This is actually a pretty common human experience, because the logic of rational addiction applies to almost anything that is an acquired taste. Wine tasters have to train the palate before they can appreciate the intricacies of fine wines. Rap music is more enjoyable when you learn about its history and movements and understand how the artists have influenced each other. Soccer is a lot more fun to watch once you understand how to recognize skillful play. Without taking the time to acquire the taste, wine is just bittersweet liquid, rap is just yelling, and soccer is just a bunch of people running around on the grass.

It’s easy to see how this could be confusing to outsiders. They haven’t done the past consumption, so they don’t experience the extra benefits, which makes it harder for them to understand other people’s desire for such consumption. Soccer looks boring to many Americans who haven’t grown up with it as part of their culture. Chinese martial arts movies and steamy romance novels both seem silly if you don’t know the dramatic conventions of the respective genres. Many members of the rock-and-roll generation hated rap and thought disco sucked.

Note that I’m not talking about differences in taste. Taste is a subjective difference between people’s preferences — some people enjoy jazz, and some people enjoy hip-hop — there’s no accounting for it, and economists don’t even try. What I’m talking about is a purely objective difference: Even if we all had exactly the same tastes, we could end up with different levels of demand for different types of goods depending on our prior consumption experiences.

Nevertheless, rational addiction is related to taste, in that they are both reasons for people to make bigoted mistakes in judgement. Just as some people mistake their personal tastes for the universal measures of quality, they also fail to take into account that other people’s differing histories may have lead them to different opinions about the value of certain consumption.

Not only do outsiders not experience the extra benefits from prior experience, but they fail to recognize that such benefits are even possible. This leads to a narrow-mindedness that is very much like bigotry — the same people who rant about video game addiction will speak admiringly about people who spend many hours practicing the piano or training for a marathon. In the worst case it can result in discriminatory rules and legislation.

I should emphasize that the word “addiction” as used in rational addiction theory is not judgmental or indicative of some kind of moral failing. Murphy and Becker developed the basic idea behind rational addiction by studying addictive behavior, but it applies to any behavior where past consumption increases the benefits of future consumption. Had they begun their studies with wine tasting or dog shows, they might have called it “acquired taste.”

Next post in this series: How all this applies to unpleasant jobs.

The Eternal Question

Radley Balko comes face to face with the Eternal Question About Politicians: Are they stupid enough to believe what they say? Or is it that they think you’re stupid enough to believe what they say?

in Vice