> Money
> The Economics Of Prostitution
> Michael Noer, 02.14.06, 12:00 PM ET
>
> Wife or whore?
> Of course, it's easy to pour cold water on some of the
> assumptions made in Edlund and Korn's mathematical model. But
> these so-called "stylized facts" are supposed to predict
> human behavior; they don't necessarily pretend to mirror it.
The problem with neoclassical mode of thinking is that instead of being Popperian falsificationism, it is self-verificationism. That is to say, it almost never tests alternative explanations against the facts to see which one holds best, but instead it selectively massages facts and builds auxiliary assumptions (i.e. uses progressive problmeshifts, as Imre Lakatos would say) to must support to its own explanation that it a priori holds as valid.
An alternative to utility maximization explanation in this case would be institutional: marriage and prostitution are two different institutions with different sets of rules defining performance and rewards. Marriage is like salaried employment, whereas prostitution is like a consulting job. In salaried employment the employee's remuneration is not tied to his/her actual performance but instead set by social expectations about how much that position's contribution is worth. Furthermore, the payments are expected to continue over a long time period, regardless of the actual performance or the employee being on vacation. Consequently, per task or per time period payments are relatively low, but the cumulative effect of those payments over long time makes those payments worthwhile.
A consultant, by contrast, charges a one-time fee tied to the service that has to recoup his/her cost incurred between jobs, for which he/she is not nominally remunerated (unlike salaried employees). Moreover, a consultant's fee is a signal of the quality of the service, the higher the fee, the better the equality. This is absolutely essential due to information asymmetry between buyer and seller - the buyer has no way of knowing beforehand what the quality of service is going to be, and unlike employer of a salaried worker, he/she cannot sack the worker if the quality proves unsatisfactory. In that situation, the consulting fee is a signal of the quality of the service, basically saying expect to get what you are paying for.
Those different institutional arrangements can explain why prostitute fees are higher than hourly wage of an employed woman much better than any utility maximization model.
Wojtek