Superfreakonomics, by Steven D. Levitt, is a thrilling journey into the depths of the hidden side of human behavior. The novel examines an array of intriguing questions and topics, ranging from the economic implications of global warming to the economics of terrorism, from a cutting edge perspective.
Key Learnings:
• Uncover hidden relationships between the economy and human behavior
• Understand the power of incentives and how to effectively use them for desired outcomes
• Explore how widespread problems affect individuals differently
• Learn how to recognize unrecognized opportunities
As a UX Designer, SuperFreakonomics provides great insight into the human side of economics, and how human behavior can be effectively manipulated to achieve desired outcomes. Additionally, books such as Nudge by Richard Thaler and Daniel Kahneman's Thinking Fast and Slow would be great complements to this book.
✏️ Highlights
Overall, 1 of every 140 miles is driven drunk, or 21 billion miles each year.
back at your friend’s party, you have made what seems to be the easiest decision in history: instead of driving home, you’re going to walk. After all, it’s only a mile.
Doing the math, you find that on a per-mile basis, a drunk walker is eight times more likely to get killed than a drunk driver. There’s one important caveat: a drunk walker isn’t likely to hurt or kill anyone other than her-or himself.
you had the option of being born anywhere in the world today, India might not be the wisest choice. Despite its vaunted progress as a major player in the global economy, the country as a whole remains excruciatingly poor. Life expectancy and literacy rates are low; pollution and corruption are high.
many Indian parents express a strong “son preference.”
Giving birth to a baby boy is like giving birth to a 401(k) retirement fund. He will grow up to be a wage-earning man who can provide for his parents in their sunset years and, when the time comes, light the funeral pyre.
the dowry system has long been under assault,
The bride’s family is also expected to pay for the wedding.
51 percent of Indian men said that wife-beating is justified under certain circumstances; more surprisingly, 54 percent of women agreed—if, for instance, a wife burns dinner or leaves the house without permission. More than 100,000 young Indian women die in fires every year, many of them “bride burnings”
According to the Indian Council of Medical Research, some 60 percent of Indian men have penises too small for the condoms manufactured to fit World Health Organization specs.
Indian women also run an outsize risk of unwanted pregnancy and sexually transmitted disease, including a high rate of HIV/AIDS. One cause is that Indian men’s condoms malfunction more than 15 percent of the time.
As it turned out, the women who recently got cable TV were significantly less willing to tolerate wife-beating, less likely to admit to having a son preference, and more likely to exercise personal autonomy. TV somehow seemed to be empowering women in a way that government interventions had not. What caused these
200,000 horses lived and worked in New York City, or 1
At the turn of the twentieth century, some 200,000 horses lived and worked in New York City, or 1 for every 17 people. But oh, the troubles they caused! Horse-drawn wagons clogged the streets terribly, and when a horse broke down, it was often put to death on the spot. This caused further delays. Many stable owners held life-insurance policies that, to guard against fraud, stipulated the animal be euthanized by a third party. This meant waiting for the police, a veterinarian, or the ASPCA to arrive. Even death didn’t end the gridlock. “Dead horses were extremely unwieldy,” writes the transportation scholar Eric Morris. “As a result, street cleaners often waited for the corpses to putrefy so they could more easily be sawed into pieces and carted off.”
The noise from iron wagon wheels and horseshoes was so disturbing—it purportedly caused widespread nervous disorders—that some cities banned horse traffic on the streets around hospitals and other sensitive areas. And it was frighteningly easy to be struck down by a horse or wagon, neither of which is as easy to control as they appear in the movies, especially on slick, crowded city streets. In 1900, horse accidents claimed the lives of 200 New Yorkers, or 1 of every 17,000 residents. In 2007, meanwhile, 274 New Yorkers died in auto accidents, or 1 of every 30,000 residents. This means that a New Yorker was nearly twice as likely to die from a horse accident in 1900 than from a car accident today. (There are unfortunately no statistics available on drunk horse-drivers, but we can assume the number would be menacingly high.) Worst of all was the dung. The average horse produced about 24 pounds of manure a day. With 200,000 horses, that’s nearly 5 million pounds of horse manure. A day. Where did it go? Decades earlier, when horses were less
The noise from iron wagon wheels and horseshoes was so disturbing—it purportedly caused widespread nervous disorders—that some cities banned horse traffic on the streets around hospitals and other sensitive areas. And it was frighteningly easy to be struck down by a horse or wagon, neither of which is as easy to control as they appear in the movies, especially on slick, crowded city streets. In 1900, horse accidents claimed the lives of 200 New Yorkers, or 1 of every 17,000 residents. In 2007, meanwhile, 274 New Yorkers died in auto accidents, or 1 of every 30,000 residents. This means that a New Yorker was nearly twice as likely to die from a horse accident in 1900 than from a car accident today. (There are unfortunately no statistics available on drunk horse-drivers, but we can assume the number would be menacingly high.) Worst of all was the dung. The average horse produced about 24 pounds of manure a day. With 200,000 horses, that’s nearly 5 million pounds of horse manure. A day. Where did it go? Decades earlier, when horses were less plentiful in cities, there was a smooth-functioning market for manure, with farmers buying it to truck off (via horse, of course) to their fields.
horse manure was piled as high as sixty feet. It lined city streets like banks of snow. In the summertime, it stank to the heavens; when the rains came, a soupy stream of horse manure flooded the crosswalks and seeped into people’s basements. Today, when you admire old New York brownstones and their elegant stoops, rising from street level to the second-story parlor, keep in mind that this was a design necessity, allowing a homeowner to rise above the sea of horse manure.
feed—crops that were becoming more costly for human consumption thanks to higher horse demand.
No one at the time was worried about global warming, but if they had been, the horse would have been Public Enemy No. 1, for its manure emits methane, a powerful greenhouse gas.
1898, New York hosted the first international urban planning conference. The agenda was dominated by horse manure, because cities around the world were experiencing the same crisis. But no solution could be found. “Stumped by the crisis,” writes Eric Morris, “the urban planning conference declared its work fruitless and broke up in three days instead of the scheduled ten.”
The world had seemingly reached the point where its largest cities could not survive without the horse but couldn’t survive with it, either. And then the problem vanished. It was neither government fiat nor divine intervention that did the trick. City dwellers did not rise up in some mass movement of altruism or self-restraint, surrendering all the benefits of horse power. The problem was solved by technological innovation.
The horse was kicked to the curb by the electric streetcar and the automobile, both of which were extravagantly cleaner and far more efficient. The automobile, cheaper to own and operate than a horse-drawn vehicle, was proclaimed “an environmental savior.” Cities around the world were able to take a deep breath—without holding their noses at last—and resume their march of progress.
The solutions that saved the twentieth century seem to have imperiled the twenty-first, because the automobile and electric streetcar carried their own negative externalities.
billion cars and thousands of coal-burning power plants seem to have warmed the earth’s atmosphere. Just as equine activity once threatened to stomp out civilization, there is now a fear that human activity will do the same.
atmosphere. Just as equine activity once threatened to stomp out civilization, there is now a fear that human activity will do the same.
Joseph Schumpeter referred to capitalism as “creative destruction.”
A good set of data can go a long way toward describing human behavior as long as the proper questions are asked of it.
In a complex world where people can be atypical in an infinite number of ways, there is great value in discovering the baseline.
If, for instance, you added up all the women and men on the planet, you would find that, on average, the typical adult human being has one breast and one testicle—and yet how many people fit that description?
only 4 of them died in 2001 from shark attacks. More people are probably run over each year by TV news vans. Elephants, meanwhile, kill at least 200 people every year. So why aren’t we petrified of them?
If sharks had any legal connections whatsoever, they surely would have sued for an injunction against Jaws.
As you will read in chapter 3, the introduction of TV in the United States produced a devastating societal change. The economic approach
As you will read in chapter 3, the introduction of TV in the United States produced a devastating societal change.
Most of us want to fix or change the world in some fashion. But to change the world, you first have to understand
Most of us want to fix or change the world in some fashion. But to change the world, you first have to understand it.
Between the thirteenth and nineteenth centuries, as many as 1 million European women, most of them poor and many of them widowed, were executed for witchcraft, taking the blame for bad weather that killed crops.
A considerable body of research has shown that overweight women suffer a greater wage penalty than overweight men. The same is true for women with bad teeth.
The U.S. “war on drugs” has been relatively ineffective precisely because it focuses on sellers and not buyers. While drug buyers obviously outnumber drug sellers, more than 90 percent of all prison time for drug convictions is served by dealers.
Besides the constant threat of arrest, there was also the deep social stigma of prostitution. Perhaps the greatest penalty was that a woman who worked as a prostitute would never be able to find a suitable husband. Combine these factors and you can see that a prostitute’s wages had to be high to entice enough women to satisfy the strong demand.
way—Ada and Minna Everleigh had accumulated, in today’s currency, about $22 million.
The biggest money, of course, was taken home by the women at the top of the prostitution pyramid. By the time the Everleigh Club was shut down—the Chicago Vice Commission finally got its way—Ada and Minna Everleigh had accumulated, in today’s currency, about $22 million.
Anyone who wants to really understand the prostitution market needs to accumulate some real data.
Mexican welfare program Oportunidades. To get aid, applicants have to itemize their personal possessions and household goods. Once an applicant is accepted, a caseworker visits his home and learns whether the applicant was telling the truth.
two economists who analyzed the data from more than 100,000 Oportunidades clients, found that applicants routinely underreported certain items, including cars, trucks, video recorders, satellite TVs, and washing machines. This shouldn’t surprise anyone. People hoping to get welfare benefits have an incentive to make it sound like they are poorer than they truly are. But as Martinelli and Parker discovered, applicants overreported other items: indoor plumbing, running water, a gas stove, and a concrete floor. Why on earth would welfare applicants say they had these essentials when they didn’t? Martinelli and Parker attribute it to embarrassment. Even people who are poor enough to need welfare apparently don’t want to admit to a welfare clerk that they have a dirt floor or live without a toilet.
Venkatesh, knowing that traditional survey methods don’t necessarily produce reliable results for a sensitive topic like prostitution, tried something different: real-time, on-the-spot data collection. He hired trackers to stand on street corners or sit in brothels with the prostitutes, directly observing some facets of their transactions and gathering more intimate details from the prostitutes as soon as the customers were gone. Most of the trackers were former prostitutes—an important credential because such women were more likely to get honest responses. Venkatesh also paid the prostitutes for participating in the study. If they were willing to have sex for money, he reasoned, surely they’d be willing to talk about having sex for money. And they were. Over the course of nearly two years, Venkatesh accumulated data on roughly 160 prostitutes in three separate South Side neighborhoods, logging more than 2,200 sexual transactions. The tracking sheets recorded a considerable variety of data, including: The specific sexual act performed, and the duration of the trick Where the act took place (in a car, outdoors, or indoors) Amount received in cash Amount received in drugs The customer’s race The customer’s approximate age The customer’s attractiveness (10 = sexy, 1 = disgusting) Whether a condom was used Whether the customer was new or returning If it could be determined, whether the customer was married; employed; affiliated with a gang; from the neighborhood Whether the prostitute stole from the customer Whether the customer gave the prostitute any trouble, violent or otherwise Whether the sex act was paid for, or was a “freebie” So what can these data tell us? Let’s start with wages.
turns out that the typical street prostitute in Chicago works 13 hours a week, performing 10 sex acts during that period, and earns an hourly wage of approximately $27. So her weekly take-home pay is roughly $350. This includes an average of $20 that a prostitute steals from her customers and acknowledges that some prostitutes accept drugs in lieu of cash—usually crack cocaine or heroin, and usually at a discount. Of all the women in Venkatesh’s study, 83 percent were drug addicts. Like LaSheena, many of these women took on other, non-prostitution work, which Venkatesh also tracked. Prostitution paid about four times more than those jobs. But as high as that wage premium may be, it looks pretty meager when you consider the job’s downsides.
In a given year, a typical prostitute in Venkatesh’s study experienced a dozen incidents of violence. At least 3 of the 160 prostitutes who participated died during the course of the study. “Most of the violence by johns is when, for some reason, they can’t consummate or can’t get erect,” says Venkatesh.
Why has the prostitute’s wage fallen so far? Because demand has fallen dramatically. Not the demand for sex. That is still robust. But prostitution, like any industry, is vulnerable to competition. Who poses the greatest competition to a prostitute? Simple: any woman who is willing to have sex with a man for free. It is no secret that sexual mores have evolved substantially in recent decades. The phrase “casual sex” didn’t exist a century ago (to say nothing of “friends with benefits”).
At least 20 percent of American men born between 1933 and 1942 had their first sexual intercourse with a prostitute.
He begged the French government to pass a law forbidding all citizens to allow sunlight to enter their homes. (Yes, his petition was a satire; in economists’ circles, this is what passes for radical
He begged the French government to pass a law forbidding all citizens to allow sunlight to enter their homes. (Yes, his petition was a satire; in economists’ circles, this is what passes for radical high jinks.)
about 4,400 women are working as street prostitutes in Chicago, turning a combined 1.6 million tricks a year for 175,000 different men.
Considering that the city’s population has grown by 30 percent since then, the per-capita count of street prostitutes has fallen significantly.
Monday is easily the slowest night of the week for these prostitutes. Fridays are the busiest, but on Saturday night a prostitute will typically earn about 20 percent more than on Friday. Why isn’t the busiest night also the most profitable? Because the single greatest determinant of a prostitute’s price is the specific trick she is hired to perform. And for whatever reason, Saturday customers purchase more expensive services. Consider the four different sexual acts these prostitutes routinely performed, each with its own price tag: It’s interesting to note that the price of oral sex has plummeted over time relative to “regular” sexual intercourse. In the days of the Everleigh Club, men paid double or triple for oral sex; now it costs less than half the price of intercourse. Why?
oral sex imposes a lower cost on the prostitute because it eliminates the possibility of pregnancy and lessens the risk of sexually transmitted disease. (It also offers what one public-health scholar calls “ease of exit,” whereby a prostitute can hurriedly escape the police or a threatening customer.) But oral sex always had those benefits. What accounted for the price difference in the old days? The best answer is that oral sex carried a sort of taboo tax. At the time, it was considered a form of perversion, especially by religious-minded folks, since it satisfied the lust requirements of sex without fulfilling the reproductive requirements. The Everleigh Club was of course happy to profit from this taboo. Indeed, the club’s physician avidly endorsed oral sex because it meant higher profits for the establishment and less wear and tear on the butterflies. But as social attitudes
oral sex imposes a lower cost on the prostitute because it eliminates the possibility of pregnancy and lessens the risk of sexually transmitted disease. (It also offers what one public-health scholar calls “ease of exit,” whereby a prostitute can hurriedly escape the police or a threatening customer.) But oral sex always had those benefits. What accounted for the price difference in the old days? The best answer is that oral sex carried a sort of taboo tax. At the time, it was considered a form of perversion, especially by religious-minded folks, since it satisfied the lust requirements of sex without fulfilling the reproductive requirements. The Everleigh Club was of course happy to profit from this taboo. Indeed, the club’s physician avidly endorsed oral sex because it meant higher profits for the establishment and less wear and tear on the butterflies. But as social attitudes changed, the price fell to reflect the new reality.
Prostitutes do not charge all customers the same price. Black customers, for instance, pay on average about $9 less per trick than white customers, while Hispanic customers are in the middle. Economists have a name for the practice of charging different prices for the same product: price discrimination.
(Venkatesh observed that black customers are more likely than whites to haggle—perhaps, he reasoned, because they’re more familiar with the neighborhood and therefore know the market better.)
customers pay about $16 more if they go through a pimp. But the customers who use pimps also tend to buy more expensive services—no manual stimulation for these gents—which further bumps up the women’s wages. So even after the pimps take their typical 25 percent commission, the prostitutes earn more money while turning fewer tricks:
The good news, according to earlier research, is that men who use street prostitutes have a surprisingly low rate of HIV infection, less than 3 percent. (The same is not true for male customers who hire male prostitutes; their rate is above 35 percent.)
You might think one woman would charge more than another who is less desirable. But that rarely happens. Why? The only sensible explanation is that most customers view the women as what economists call perfect substitutes, or commodities that are easily interchanged. Just as a shopper in a grocery store may see one bunch of bananas as pretty much identical to the rest, the same principle seems to hold true for the men who frequent this market.
Perhaps the prostitutes who work with pimps have different characteristics than the others. Maybe they’re savvier or less drug addicted.
the pimpact goes well beyond producing higher wages. A prostitute who works with a pimp is less likely to be beaten up by a customer or forced into giving freebies to gang members.
Just as you can sell your body with or without the aid of a pimp, you can sell your house with or without a Realtor.
Just as you can sell your body with or without the aid of a pimp, you can sell your house with or without a Realtor. While Realtors charge a much lower commission than the pimps—about 5 percent versus 25 percent—the Realtor’s cut is usually in the tens of thousands of dollars for a single sale.
What did they find? The homes sold on FSBOMadison.com typically fetched about the same price as the homes sold by Realtors. That doesn’t make the Realtors look very good. Using a Realtor to sell a $400,000 house means paying a commission of about $20,000—versus just $150 to FSBOMadison.com.
In the old days, prostitution rings in even the poorest Chicago neighborhoods were usually run by women. But men, attracted by the high wages, eventually took over—yet another example in the long history of men stepping in to outearn women.
These six pimps ranged in age from their early thirties to their late forties and “were doing pretty well,” Venkatesh says, making roughly $50,000 a year. Some also held legit jobs—car mechanic or store manager—and most owned their homes. None were drug addicts.
“When you arrest the pimps, there’ll just be fighting to replace them,” Venkatesh says, “and the violence is worse than the prostitution.”
The pimps agreed to stay away from the park when kids were playing there, and to keep the prostitution hidden. In return, the police would leave the pimps alone—and, importantly, they wouldn’t arrest the prostitutes either.
Of all the tricks turned by the prostitutes he tracked, roughly 3 percent were freebies given to police officers.
one feature of a market economy is that prices tend to find a level whereby even the worst conceivable job is worth doing. As bad off as these women are, they would seem to be worse off without prostitution.
the long-loved American tradition known as the family reunion. Every summer around the Fourth of July holiday, Washington Park is thronged with families and other large groups who get together for cookouts and parties. For some of these visitors, catching up with Aunt Ida over lemonade isn’t quite stimulating enough. It turns out that the demand for prostitutes in Washington Park skyrockets every year during this period.
this surge in demand attracts a special kind of worker—a woman who steers clear of prostitution all year long but, during this busy season, drops her other work and starts turning tricks. Most of these part-time prostitutes have children and take care of their households; they aren’t drug addicts.
As for the question posed in this chapter’s title—How is a street prostitute like a department-store Santa?—the answer should be obvious: they both take advantage of short-term job opportunities brought about by holiday spikes in demand.
Consider a recent pair of experiments in which young men and women were recruited to take an SAT-style math test with twenty questions. In one version, every participant was paid a flat rate, $5 for showing up and another $15 for completing the test. In the second version, participants were paid the $5 show-up fee and another $2 for each correct answer. How’d they do? In the flat-rate version, the men performed only slightly better, getting 1 more correct answer out of 20 than the women. But in the cash-incentive version, the men blew away the women. The women’s performance barely budged when compared with the flat-rate version, whereas the average man scored an extra 2 correct questions out of the 20.
“It is much harder for men to transition to women than for women to transition to men,” Barres admits. The problem, he says, is that males are presumed to be competent in certain fields—especially areas like science and finance—while females are not.
Schilt and Wiswall found that women who become men earn slightly more money after their gender transitions, while men who become women make, on average, nearly one-third less than their previous wage.
But she just didn’t like working all that hard. So she became an entrepreneur, launching a one-woman business that enabled her to work just ten or fifteen hours a week and earn five times her old salary. Her name is Allie, and she is a prostitute.
Running a one-woman operation held several advantages, the main one being that she didn’t have to share her revenues with anyone. In the old days, Allie probably would have worked for someone like the Everleigh sisters, who paid their girls handsomely but took enough off the top to make themselves truly rich.
She saw clients in her apartment, mainly during the day. Most of them were middle-aged white men, 80 percent of whom were married, and they found it easier to slip off during work hours than explain an evening absence.
Overall, 1 of every 140 miles is driven drunk, or 21 billion miles each year.
back at your friend’s party, you have made what seems to be the easiest decision in history: instead of driving home, you’re going to walk. After all, it’s only a mile.
Doing the math, you find that on a per-mile basis, a drunk walker is eight times more likely to get killed than a drunk driver. There’s one important caveat: a drunk walker isn’t likely to hurt or kill anyone other than her-or himself.
you had the option of being born anywhere in the world today, India might not be the wisest choice. Despite its vaunted progress as a major player in the global economy, the country as a whole remains excruciatingly poor. Life expectancy and literacy rates are low; pollution and corruption are high.
many Indian parents express a strong “son preference.”
Giving birth to a baby boy is like giving birth to a 401(k) retirement fund. He will grow up to be a wage-earning man who can provide for his parents in their sunset years and, when the time comes, light the funeral pyre.
the dowry system has long been under assault,
The bride’s family is also expected to pay for the wedding.
51 percent of Indian men said that wife-beating is justified under certain circumstances; more surprisingly, 54 percent of women agreed—if, for instance, a wife burns dinner or leaves the house without permission. More than 100,000 young Indian women die in fires every year, many of them “bride burnings”
According to the Indian Council of Medical Research, some 60 percent of Indian men have penises too small for the condoms manufactured to fit World Health Organization specs.
Indian women also run an outsize risk of unwanted pregnancy and sexually transmitted disease, including a high rate of HIV/AIDS. One cause is that Indian men’s condoms malfunction more than 15 percent of the time.
As it turned out, the women who recently got cable TV were significantly less willing to tolerate wife-beating, less likely to admit to having a son preference, and more likely to exercise personal autonomy. TV somehow seemed to be empowering women in a way that government interventions had not. What caused these
200,000 horses lived and worked in New York City, or 1
At the turn of the twentieth century, some 200,000 horses lived and worked in New York City, or 1 for every 17 people. But oh, the troubles they caused! Horse-drawn wagons clogged the streets terribly, and when a horse broke down, it was often put to death on the spot. This caused further delays. Many stable owners held life-insurance policies that, to guard against fraud, stipulated the animal be euthanized by a third party. This meant waiting for the police, a veterinarian, or the ASPCA to arrive. Even death didn’t end the gridlock. “Dead horses were extremely unwieldy,” writes the transportation scholar Eric Morris. “As a result, street cleaners often waited for the corpses to putrefy so they could more easily be sawed into pieces and carted off.”
The noise from iron wagon wheels and horseshoes was so disturbing—it purportedly caused widespread nervous disorders—that some cities banned horse traffic on the streets around hospitals and other sensitive areas. And it was frighteningly easy to be struck down by a horse or wagon, neither of which is as easy to control as they appear in the movies, especially on slick, crowded city streets. In 1900, horse accidents claimed the lives of 200 New Yorkers, or 1 of every 17,000 residents. In 2007, meanwhile, 274 New Yorkers died in auto accidents, or 1 of every 30,000 residents. This means that a New Yorker was nearly twice as likely to die from a horse accident in 1900 than from a car accident today. (There are unfortunately no statistics available on drunk horse-drivers, but we can assume the number would be menacingly high.) Worst of all was the dung. The average horse produced about 24 pounds of manure a day. With 200,000 horses, that’s nearly 5 million pounds of horse manure. A day. Where did it go? Decades earlier, when horses were less
The noise from iron wagon wheels and horseshoes was so disturbing—it purportedly caused widespread nervous disorders—that some cities banned horse traffic on the streets around hospitals and other sensitive areas. And it was frighteningly easy to be struck down by a horse or wagon, neither of which is as easy to control as they appear in the movies, especially on slick, crowded city streets. In 1900, horse accidents claimed the lives of 200 New Yorkers, or 1 of every 17,000 residents. In 2007, meanwhile, 274 New Yorkers died in auto accidents, or 1 of every 30,000 residents. This means that a New Yorker was nearly twice as likely to die from a horse accident in 1900 than from a car accident today. (There are unfortunately no statistics available on drunk horse-drivers, but we can assume the number would be menacingly high.) Worst of all was the dung. The average horse produced about 24 pounds of manure a day. With 200,000 horses, that’s nearly 5 million pounds of horse manure. A day. Where did it go? Decades earlier, when horses were less plentiful in cities,
The noise from iron wagon wheels and horseshoes was so disturbing—it purportedly caused widespread nervous disorders—that some cities banned horse traffic on the streets around hospitals and other sensitive areas. And it was frighteningly easy to be struck down by a horse or wagon, neither of which is as easy to control as they appear in the movies, especially on slick, crowded city streets. In 1900, horse accidents claimed the lives of 200 New Yorkers, or 1 of every 17,000 residents. In 2007, meanwhile, 274 New Yorkers died in auto accidents, or 1 of every 30,000 residents. This means that a New Yorker was nearly twice as likely to die from a horse accident in 1900 than from a car accident today. (There are unfortunately no statistics available on drunk horse-drivers, but we can assume the number would be menacingly high.) Worst of all was the dung. The average horse produced about 24 pounds of manure a day. With 200,000 horses, that’s nearly 5 million pounds of horse manure. A day. Where did it go? Decades earlier, when horses were less plentiful in cities, there was a smooth-functioning market for manure, with farmers buying it to truck off (via horse, of course) to their fields.
horse manure was piled as high as sixty feet. It lined city streets like banks of snow. In the summertime, it stank to the heavens; when the rains came, a soupy stream of horse manure flooded the crosswalks and seeped into people’s basements. Today, when you admire old New York brownstones and their elegant stoops, rising from street level to the second-story parlor, keep in mind that this was a design necessity, allowing a homeowner to rise above the sea of horse manure.
feed—crops that were becoming more costly for human consumption thanks to higher horse demand.
No one at the time was worried about global warming, but if they had been, the horse would have been Public Enemy No. 1, for its manure emits methane, a powerful greenhouse gas.
1898, New York hosted the first international urban planning conference. The agenda was dominated by horse manure, because cities around the world were experiencing the same crisis. But no solution could be found. “Stumped by the crisis,” writes Eric Morris, “the urban planning conference declared its work fruitless and broke up in three days instead of the scheduled ten.”
The world had seemingly reached the point where its largest cities could not survive without the horse but couldn’t survive with it, either. And then the problem vanished. It was neither government fiat nor divine intervention that did the trick. City dwellers did not rise up in some mass movement of altruism or self-restraint, surrendering all the benefits of horse power. The problem was solved by technological innovation.
The horse was kicked to the curb by the electric streetcar and the automobile, both of which were extravagantly cleaner and far more efficient. The automobile, cheaper to own and operate than a horse-drawn vehicle, was proclaimed “an environmental savior.” Cities around the world were able to take a deep breath—without holding their noses at last—and resume their march of progress.
The solutions that saved the twentieth century seem to have imperiled the twenty-first, because the automobile and electric streetcar carried their own negative externalities.
billion cars and thousands of coal-burning power plants seem to have warmed the earth’s atmosphere. Just as equine activity once threatened to stomp out civilization, there is now a fear that human activity will do the same.
atmosphere. Just as equine activity once threatened to stomp out civilization, there is now a fear that human activity will do the same.
Joseph Schumpeter referred to capitalism as “creative destruction.”
A good set of data can go a long way toward describing human behavior as long as the proper questions are asked of it.
In a complex world where people can be atypical in an infinite number of ways, there is great value in discovering the baseline.
If, for instance, you added up all the women and men on the planet, you would find that, on average, the typical adult human being has one breast and one testicle—and yet how many people fit that description?
only 4 of them died in 2001 from shark attacks. More people are probably run over each year by TV news vans. Elephants, meanwhile, kill at least 200 people every year. So why aren’t we petrified of them?
If sharks had any legal connections whatsoever, they surely would have sued for an injunction against Jaws.
As you will read in chapter 3, the introduction of TV in the United States produced a devastating societal change. The economic approach
As you will read in chapter 3, the introduction of TV in the United States produced a devastating societal change.
Most of us want to fix or change the world in some fashion. But to change the world, you first have to understand
Most of us want to fix or change the world in some fashion. But to change the world, you first have to understand it.
Between the thirteenth and nineteenth centuries, as many as 1 million European women, most of them poor and many of them widowed, were executed for witchcraft, taking the blame for bad weather that killed crops.
A considerable body of research has shown that overweight women suffer a greater wage penalty than overweight men. The same is true for women with bad teeth.
The U.S. “war on drugs” has been relatively ineffective precisely because it focuses on sellers and not buyers. While drug buyers obviously outnumber drug sellers, more than 90 percent of all prison time for drug convictions is served by dealers.
Besides the constant threat of arrest, there was also the deep social stigma of prostitution. Perhaps the greatest penalty was that a woman who worked as a prostitute would never be able to find a suitable husband. Combine these factors and you can see that a prostitute’s wages had to be high to entice enough women to satisfy the strong demand.
way—Ada and Minna Everleigh had accumulated, in today’s currency, about $22 million.
The biggest money, of course, was taken home by the women at the top of the prostitution pyramid. By the time the Everleigh Club was shut down—the Chicago Vice Commission finally got its way—Ada and Minna Everleigh had accumulated, in today’s currency, about $22 million.
Anyone who wants to really understand the prostitution market needs to accumulate some real data.
Mexican welfare program Oportunidades. To get aid, applicants have to itemize their personal possessions and household goods. Once an applicant is accepted, a caseworker visits his home and learns whether the applicant was telling the truth.
two economists who analyzed the data from more than 100,000 Oportunidades clients, found that applicants routinely underreported certain items, including cars, trucks, video recorders, satellite TVs, and washing machines. This shouldn’t surprise anyone. People hoping to get welfare benefits have an incentive to make it sound like they are poorer than they truly are. But as Martinelli and Parker discovered, applicants overreported other items: indoor plumbing, running water, a gas stove, and a concrete floor. Why on earth would welfare applicants say they had these essentials when they didn’t? Martinelli and Parker attribute it to embarrassment. Even people who are poor enough to need welfare apparently don’t want to admit to a welfare clerk that they have a dirt floor or live without a toilet.
Venkatesh, knowing that traditional survey methods don’t necessarily produce reliable results for a sensitive topic like prostitution, tried something different: real-time, on-the-spot data collection. He hired trackers to stand on street corners or sit in brothels with the prostitutes, directly observing some facets of their transactions and gathering more intimate details from the prostitutes as soon as the customers were gone. Most of the trackers were former prostitutes—an important credential because such women were more likely to get honest responses. Venkatesh also paid the prostitutes for participating in the study. If they were willing to have sex for money, he reasoned, surely they’d be willing to talk about having sex for money. And they were. Over the course of nearly two years, Venkatesh accumulated data on roughly 160 prostitutes in three separate South Side neighborhoods, logging more than 2,200 sexual transactions. The tracking sheets recorded a considerable variety of data, including: The specific sexual act performed, and the duration of the trick Where the act took place (in a car, outdoors, or indoors) Amount received in cash Amount received in drugs The customer’s race The customer’s approximate age The customer’s attractiveness (10 = sexy, 1 = disgusting) Whether a condom was used Whether the customer was new or returning If it could be determined, whether the customer was married; employed; affiliated with a gang; from the neighborhood Whether the prostitute stole from the customer Whether the customer gave the prostitute any trouble, violent or otherwise Whether the sex act was paid for, or was a “freebie” So what can these data tell us? Let’s start with wages.
turns out that the typical street prostitute in Chicago works 13 hours a week, performing 10 sex acts during that period, and earns an hourly wage of approximately $27. So her weekly take-home pay is roughly $350. This includes an average of $20 that a prostitute steals from her customers and acknowledges that some prostitutes accept drugs in lieu of cash—usually crack cocaine or heroin, and usually at a discount. Of all the women in Venkatesh’s study, 83 percent were drug addicts. Like LaSheena, many of these women took on other, non-prostitution work, which Venkatesh also tracked. Prostitution paid about four times more than those jobs. But as high as that wage premium may be, it looks pretty meager when you consider the job’s downsides.
In a given year, a typical prostitute in Venkatesh’s study experienced a dozen incidents of violence. At least 3 of the 160 prostitutes who participated died during the course of the study. “Most of the violence by johns is when, for some reason, they can’t consummate or can’t get erect,” says Venkatesh.
Why has the prostitute’s wage fallen so far? Because demand has fallen dramatically. Not the demand for sex. That is still robust. But prostitution, like any industry, is vulnerable to competition. Who poses the greatest competition to a prostitute? Simple: any woman who is willing to have sex with a man for free. It is no secret that sexual mores have evolved substantially in recent decades. The phrase “casual sex” didn’t exist a century ago (to say nothing of “friends with benefits”).
At least 20 percent of American men born between 1933 and 1942 had their first sexual intercourse with a prostitute.
He begged the French government to pass a law forbidding all citizens to allow sunlight to enter their homes. (Yes, his petition was a satire; in economists’ circles, this is what passes for radical
He begged the French government to pass a law forbidding all citizens to allow sunlight to enter their homes. (Yes, his petition was a satire; in economists’ circles, this is what passes for radical high jinks.)
about 4,400 women are working as street prostitutes in Chicago, turning a combined 1.6 million tricks a year for 175,000 different men.
Considering that the city’s population has grown by 30 percent since then, the per-capita count of street prostitutes has fallen significantly.
Monday is easily the slowest night of the week for these prostitutes. Fridays are the busiest, but on Saturday night a prostitute will typically earn about 20 percent more than on Friday. Why isn’t the busiest night also the most profitable? Because the single greatest determinant of a prostitute’s price is the specific trick she is hired to perform. And for whatever reason, Saturday customers purchase more expensive services. Consider the four different sexual acts these prostitutes routinely performed, each with its own price tag: It’s interesting to note that the price of oral sex has plummeted over time relative to “regular” sexual intercourse. In the days of the Everleigh Club, men paid double or triple for oral sex; now it costs less than half the price of intercourse. Why?
oral sex imposes a lower cost on the prostitute because it eliminates the possibility of pregnancy and lessens the risk of sexually transmitted disease. (It also offers what one public-health scholar calls “ease of exit,” whereby a prostitute can hurriedly escape the police or a threatening customer.) But oral sex always had those benefits. What accounted for the price difference in the old days? The best answer is that oral sex carried a sort of taboo tax. At the time, it was considered a form of perversion, especially by religious-minded folks, since it satisfied the lust requirements of sex without fulfilling the reproductive requirements. The Everleigh Club was of course happy to profit from this taboo. Indeed, the club’s physician avidly endorsed oral sex because it meant higher profits for the establishment and less wear and tear on the butterflies. But as social attitudes
oral sex imposes a lower cost on the prostitute because it eliminates the possibility of pregnancy and lessens the risk of sexually transmitted disease. (It also offers what one public-health scholar calls “ease of exit,” whereby a prostitute can hurriedly escape the police or a threatening customer.) But oral sex always had those benefits. What accounted for the price difference in the old days? The best answer is that oral sex carried a sort of taboo tax. At the time, it was considered a form of perversion, especially by religious-minded folks, since it satisfied the lust requirements of sex without fulfilling the reproductive requirements. The Everleigh Club was of course happy to profit from this taboo. Indeed, the club’s physician avidly endorsed oral sex because it meant higher profits for the establishment and less wear and tear on the butterflies. But as social attitudes changed, the price fell to reflect the new reality.
Prostitutes do not charge all customers the same price. Black customers, for instance, pay on average about $9 less per trick than white customers, while Hispanic customers are in the middle. Economists have a name for the practice of charging different prices for the same product: price discrimination.
(Venkatesh observed that black customers are more likely than whites to haggle—perhaps, he reasoned, because they’re more familiar with the neighborhood and therefore know the market better.)
customers pay about $16 more if they go through a pimp. But the customers who use pimps also tend to buy more expensive services—no manual stimulation for these gents—which further bumps up the women’s wages. So even after the pimps take their typical 25 percent commission, the prostitutes earn more money while turning fewer tricks:
The good news, according to earlier research, is that men who use street prostitutes have a surprisingly low rate of HIV infection, less than 3 percent. (The same is not true for male customers who hire male prostitutes; their rate is above 35 percent.)
You might think one woman would charge more than another who is less desirable. But that rarely happens. Why? The only sensible explanation is that most customers view the women as what economists call perfect substitutes, or commodities that are easily interchanged. Just as a shopper in a grocery store may see one bunch of bananas as pretty much identical to the rest, the same principle seems to hold true for the men who frequent this market.
Perhaps the prostitutes who work with pimps have different characteristics than the others. Maybe they’re savvier or less drug addicted.
the pimpact goes well beyond producing higher wages. A prostitute who works with a pimp is less likely to be beaten up by a customer or forced into giving freebies to gang members.
Just as you can sell your body with or without the aid of a pimp, you can sell your house with or without a Realtor.
Just as you can sell your body with or without the aid of a pimp, you can sell your house with or without a Realtor. While Realtors charge a much lower commission than the pimps—about 5 percent versus 25 percent—the Realtor’s cut is usually in the tens of thousands of dollars for a single sale.
What did they find? The homes sold on FSBOMadison.com typically fetched about the same price as the homes sold by Realtors. That doesn’t make the Realtors look very good. Using a Realtor to sell a $400,000 house means paying a commission of about $20,000—versus just $150 to FSBOMadison.com.
In the old days, prostitution rings in even the poorest Chicago neighborhoods were usually run by women. But men, attracted by the high wages, eventually took over—yet another example in the long history of men stepping in to outearn women.
These six pimps ranged in age from their early thirties to their late forties and “were doing pretty well,” Venkatesh says, making roughly $50,000 a year. Some also held legit jobs—car mechanic or store manager—and most owned their homes. None were drug addicts.
“When you arrest the pimps, there’ll just be fighting to replace them,” Venkatesh says, “and the violence is worse than the prostitution.”
The pimps agreed to stay away from the park when kids were playing there, and to keep the prostitution hidden. In return, the police would leave the pimps alone—and, importantly, they wouldn’t arrest the prostitutes either.
Of all the tricks turned by the prostitutes he tracked, roughly 3 percent were freebies given to police officers.
one feature of a market economy is that prices tend to find a level whereby even the worst conceivable job is worth doing. As bad off as these women are, they would seem to be worse off without prostitution.
the long-loved American tradition known as the family reunion. Every summer around the Fourth of July holiday, Washington Park is thronged with families and other large groups who get together for cookouts and parties. For some of these visitors, catching up with Aunt Ida over lemonade isn’t quite stimulating enough. It turns out that the demand for prostitutes in Washington Park skyrockets every year during this period.
this surge in demand attracts a special kind of worker—a woman who steers clear of prostitution all year long but, during this busy season, drops her other work and starts turning tricks. Most of these part-time prostitutes have children and take care of their households; they aren’t drug addicts.
As for the question posed in this chapter’s title—How is a street prostitute like a department-store Santa?—the answer should be obvious: they both take advantage of short-term job opportunities brought about by holiday spikes in demand.
Consider a recent pair of experiments in which young men and women were recruited to take an SAT-style math test with twenty questions. In one version, every participant was paid a flat rate, $5 for showing up and another $15 for completing the test. In the second version, participants were paid the $5 show-up fee and another $2 for each correct answer. How’d they do? In the flat-rate version, the men performed only slightly better, getting 1 more correct answer out of 20 than the women. But in the cash-incentive version, the men blew away the women. The women’s performance barely budged when compared with the flat-rate version, whereas the average man scored an extra 2 correct questions out of the 20.
“It is much harder for men to transition to women than for women to transition to men,” Barres admits. The problem, he says, is that males are presumed to be competent in certain fields—especially areas like science and finance—while females are not.
Schilt and Wiswall found that women who become men earn slightly more money after their gender transitions, while men who become women make, on average, nearly one-third less than their previous wage.
But she just didn’t like working all that hard. So she became an entrepreneur, launching a one-woman business that enabled her to work just ten or fifteen hours a week and earn five times her old salary. Her name is Allie, and she is a prostitute.
Running a one-woman operation held several advantages, the main one being that she didn’t have to share her revenues with anyone. In the old days, Allie probably would have worked for someone like the Everleigh sisters, who paid their girls handsomely but took enough off the top to make themselves truly rich.
She saw clients in her apartment, mainly during the day. Most of them were middle-aged white men, 80 percent of whom were married, and they found it easier to slip off during work hours than explain an evening absence.
