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An Economic Index for Sex?

September 9, 2010, 9:00 AM
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University classes are starting so I thought I would write a blog post that would encourage students to think about the world. This idea came from a project that was done a few years ago by a group of my students in my Economics of Sex and Love class, so I thought it would be perfect.

You have probably heard of the Big Mac Index which is produced annually by the Economist magazine. The point of the index is to make exchange rate theory more palatable by giving a real world example of how purchasing power parity holds (or does not hold) around the world. They do this by comparing the price of a fairly uniform, tradable good—the Big Mac—in about 120 different countries. The idea is that by converting the foreign price of a Big Mac into U.S. dollars we can determine if a country's currency is either over- or under-valued relative to the U.S. dollar. This tests the theory that exchange rates adjust to make the purchasing power of currencies equivalent across countries.

Now you may wonder how the Big Mac is a tradable good, and you wouldn’t be alone, but the somewhat tenuous idea is that McDonald’s has a sufficient market power that their inputs are imported at fair market price. So while the Big Mac is not traded, the goods used to produce it are and that is good enough.

I have another idea, The Blow Job Index. It is, I assume, a fairly uniform service. It has to be at least as tradable as the Big Mac; after all, I am certain that sex workers cross borders looking for higher wages more frequently than McDonald’s workers do. And, while tourists might eat at McDonald’s when visiting foreign countries, they don’t exactly flock to countries where they can find the cheapest Big Mac. The purchasers of the services of sex trade workers do this all the time. These two factors, one supply and the other demand, should make the price of a blow job internationally competitive.

While the idea may seem frivolous, I think that in fact having this information would tell us a great deal about the global sex trade. After all, it is a multibillion dollar global industry which employs millions of people and makes a substantial contribution to the global economy. Wouldn’t it be interesting to understand that market in the global context?

I think that if we created this index what we would find is that, while internationally traded, the prices charged by sex workers for this uniform service does not converge between countries. While there is only one input to production, the sex worker, numerous other factors contribute to the prices that worker is paid. If we produced a blow job index we could analyze the differences between country variations in prices to better understand the factors that determine both the supply and the demand; that is, we can describe the whole market.For example, is the price of a blow job higher or lower in countries where the act is either illegal or stigmatized, or both? In what way does regulation influence prices? How about the level of promiscuity in a specific country; are blow jobs more expensive when there are fewer outside options? How about the ratio of men to women or the perhaps even the presence of polygamy? Maybe the education system plays a role in creating the supply of sex workers; or the immigration system; or war; or poverty. You get the idea.

Forget "interesting," isn’t it necessary to understand this market in the global context? I am not sure how we even begin to do this without knowing the global prices of this simple service.

 

An Economic Index for Sex?

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