One of the oldest professions existing since the
history of mankind is prostitution. Over the period of time, societies evolved
and defined a moral code of conduct, based on which, prostitution was deemed
illegal. Most countries across the globe have declared prostitution as illegal.
Same is true for India as well. The irony is that despite laws, prostitution as
a profession continues to thrive across the globe. So what does this indicate?
The trade addresses a very basic physical need of mankind and any amount of
regulation cannot subjugate the demand for such a service. The economic forces
of supply and demand will enforce themselves, thereby creating a viable market
for trade. Government enforced ban on the trade creates a divide between supply
and demand; it does not curb the demand.
Let us consider the economic implications of the ban:
a) The government intends to kill “supply” of the service by banning it. The
“demand” for the service is subdued only marginally, because of fear. The point
to be noted is that the demand still exists, only surreptitiously.
Ban on prostitution effectively implies a price ceiling of 0. Legally there
would be no supply of the service. Therefore buyers will have to pay a much
higher price (than what would have been a free trade equilibrium price) to
avail the service. The price will factor the compensation of the service plus
the cost of additional risk attached to the trade. (Because of the illegal
nature of the service). In effect the consumer surplus is minimized. The providers of
service (in this case, middlemen) extract maximum possible benefit from the
consumer. Therefore the producer surplus is maximum.
b) Since a reasonable “undercover” demand exists, there is a significant
section of society fulfilling this demand. Therefore a significant amount of
money is transacted and all of it remains unaccounted. Therefore the government
loses out on taxes which it could have earned.
c) The police exploit the prostitutes and demand favours in cash or kind to let
their business continue. Therefore the ban encourages corruption in the society.
So the question to be asked is why should we not make prostitution legal
in India?
One may argue against it on moral grounds, but there can be no denying that a
market exists, whether anyone likes it or not. In each and every city there are
known “red light areas”. There are more than one lakh prostitutes operating in
Bombay alone. My argument is that legalizing prostitution and letting it work
as an organized industry in the free market would lead to a larger economic and
social benefit to all. The following are some of the benefits that can be
accrued:
a) A legal certificate to the prostitution industry would eliminate the
corruption associated with it. Therefore prostitutes are freed from economic
exploitation and are free to charge as per market price for their service.
Therefore they have the opportunity to maximize their profits.
Prostitutes also get a legal social status in the working class.
b) The buyers of the service will benefit as the
risk associated with the transaction (of being apprehended by the police) is
removed. The price they pay for the service would be the equilibrium price and
no more. So in effect, the consumer surplus increases.
c) The inherent health risk associated with the
trade remains. At the same time, it opens up a huge market for health care
industry to freely popularize contraceptive products such as male and female
condoms. Medical insurance companies have opportunity to come up with
innovative plans to provide health cover to both buyers and sellers.
d) The government can issue trade permits to
legalize the prostitution service as an organized trade. This will help to
bring a large section of currently untapped transactions under the purview of
tax and therefore increase revenues of government.
e) The law enforcement agencies, such as the police,
can focus their energies towards serious crimes such as murders rather than
worry about prostitutes. This means that the taxpayer’s money is put to a
better use.
f) Legality will also help to protect the
prostitutes against physical exploitation and abuse. Currently prostitutes
cannot seek justice against exploitation. Legalizing prostitution would mean
that they are protected by law.
Prostitution is a low skill, high returns trade.
Organized prostitution gives an opportunity to women voluntarily engaging in
trade to generate a better return and improve their life style. Regardless of
the moral stand we have, it can be seen that:
1. The free market and the forces of supply and
demand are the true deciding factors whether a trade can exist in society or
not. If there’s no demand, the trade automatically dies.
2. The socio- economic benefits of legalizing
prostitution are undeniable.
Therefore it can be concluded that having government
policies allowing organized prostitution in the form of free trade will lead to
a larger welfare of the society.
