How to sell sex

The Economist: Economists let some light in on the shady market for paid sex.

Steven Levitt (an economics professor at the University of Chicago and co-author of “Freakonomics”) presented preliminary findings from a study conducted with Sudhir Venkatesh, a sociologist at Columbia University. Their research on the economics of street prostitution combines official arrest records with data on 2,200 “tricks” (transactions), collected by Mr Venkatesh in co-operation with sex workers in three Chicago districts.

The results are fascinating. Almost half of the city's arrests for prostitution take place in just 0.3% of its street corners. The industry is concentrated in so few locations because prostitutes and their clients need to be able to find each other.

Prostitutes are more likely to have sex with a police officer than to be arrested by one.

Sex without a condom is the norm.

One controversial finding is that prostitutes do better with pimps—they work fewer hours and are less likely to be arrested by the police or preyed on by gang members.

In many respects, the paid-sex industry is much like any other business. Pricing strategies are familiar from other settings. Despite evidence of a myopic attitude towards risk, there have been plenty of recent examples of that in the finance industry too. Illegality and lack of regulation are likely to heighten public-health risks. The Ecuador study concluded that rigorous policing of street prostitution might limit the spread of STIs by directing sex workers into the safer environs of licensed brothels.

Cold Reading, Statistical Discrimination and Initial Trust

"Cold reading is a technique used to convince another person that the reader knows much more about a subject than they actually do. Even without prior knowledge of a person, a practiced cold reader can still quickly obtain a great deal of information about the subject by carefully analyzing the person's body language, clothing or fashion, hairstyle, gender, sexual orientation, religion, race orethnicity, level of education, manner of speech, place of origin, etc. This technique is also called offender profiling. Cold readers commonly employ high probability guesses about the subject, quickly picking up on signals from their subjects as to whether their guesses are in the right direction or not, and then emphasizing and reinforcing any chance connections the subjects acknowledge while quickly moving on from missed guesses".

This definition of cold reading reminded me of Posner's (harsh) review of Blink - Blinkered (html). There are two points from Posner's essay that may suggest how person A may set her initial trust in B. The first point may suggest that A does so based not only on B's behavior but also on the (social) group(s) to which B belongs. The second point may remind us that: asking for recomendations about B may be costly; and that Bayesian reasoning may help in rationally deciding whether to trust. Here are the two (by now-coveted) points:

(1) "If two groups happen to differ on average, even though there is considerable overlap between the groups, it may be sensible to ascribe the group's average characteristics to each member of the group, even though one knows that many members deviate from the average. An individual's characteristics may be difficult to determine in a brief encounter, and a salesman cannot afford to waste his time in a protracted one, and so he may quote a high price to every black shopper even though he knows that some blacks are just as shrewd and experienced car shoppers as the average white, or more so. Economists use the term "statistical discrimination" to describe this behavior. It is a better label than stereotyping for what is going on in the auto-dealer case, because it is more precise and lacks the distracting negative connotation of stereotype, defined by Gladwell as "a rigid and unyielding system." But is it? Think of how stereotypes of professional women, Asians, and homosexuals have changed in recent years. Statistical discrimination erodes as the average characteristics of different groups converge."

(2) " Such pratfalls, together with the inaptness of the stories that constitute the entirety of the book, make me wonder how far Gladwell has actually delved into the literatures that bear on his subject, which is not a new one. These include a philosophical literature illustrated by the work of Michael Polanyi on tacit knowledge and on "know how" versus "know that"; a psychological literature on cognitive capabilities and distortions; a literature in both philosophy and psychology that explores the cognitive role of the emotions; a literature in evolutionary biology that relates some of these distortions to conditions in the "ancestral environment" (the environment in which the human brain reached approximately its current level of development); a psychiatric litetature on autism and other cognitive disturbances; an economic literature on the costs of acquiring and absorbing information; a literature at the intersection of philosophy, statistics, and economics that explores the rationality of basing decisions on subjective estimates of probability (Bayes's Theorem); and a literature in neuroscience that relates cognitive and emotional states to specific parts of and neuronal activities in the brain. "