Recently in Informal Institutions Category

A Puzzle for Freakonomics Fans

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I’ve often wondered how does street musicians outside major metro stations decide on who should be the one to play on a given day. Does it work on a first come basis? I doubt it. How does a Chinese, an African American and a white country singer coordinate to play on alternative days?

First Kill All Economists!

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Satoshi Kanazawa at LSE in a recent paper titled, “First Kill All Economists…

“Microeconomics and its model of the singular and unitary actor can no longer adequately explain organizational behavior now that there are men and women in corporations. Evolutionary psychology, with its premise of fundamental and inherent sex differences, is necessary to replace microeconomics as the predominant theoretical perspective in business and management schools. The recent Safeway fiasco illustrates the danger of continuing to use microeconomics in the study of management in the 21st century.”

He has also made other predictions as well;

"The productivity of male scientists tends to drop right after marriage,…Scientists tend to 'desist' from scientific research upon marriage, just like criminals desist from crime upon marriage…Men conduct scientific research (or do anything else) in order to attract women and get married (albeit unconsciously),.. "What’s the point of doing science (or anything else) if one is already married? Marriage (or, more accurately reproductive success, which men can usually attain only through marriage) is the goal; science or anything else men do is but a means. From my perspective, scientists are no different than anybody else; evolutionary psychology applies to all humans equally,"

Unsolicited advice to Kanazawa, paraphrasing Hayek, “an evolutionary psychologist who’s only an evolutionary psychologist cannot be a good evolutionary psychologist”. For some pitfalls of evolutionary psychology read the book Ramachandran's Phantoms in the Brain.

Sexonomics- Women Sell, Men Buy

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John Allen Paulos in his latest ‘Who’s Counting’ column reviews this paper, ‘A Theory of Prostitution’ which tries to answer the puzzle: Why is it that prostitution is so relatively well-paid?

“Developing the consequences of their mathematical model, Edlund and Korn argue that the primary reason for the income differential is not the risk sometimes associated with the practice of prostitution but rather that prostitutes greatly diminish their chances for marriage by virtue of their occupation. Men generally don't want to marry (ex)prostitutes, and so women must be relatively well-compensated in order to forgo the opportunity to marry….the authors also conclude that prostitution generally declines as men's incomes increase…Wives and prostitutes are competing "commodities" (in the reductionist view of economists, that is), but wives are distinctly superior in that they can produce children that are socially recognized as coming from the father. ..Thus, if men have more money, they tend to buy the superior good and, at least when wives and prostitutes come from the same pool of women, tend to buy (rent) the cheaper good less frequently….Putting these two tendencies together suggests that if one wishes to reduce prostitution, increasing the incomes of both men and women is likely to be more effective than imposing legal penalties.”

Abstract of the paper;

The Cost of Safe Sex

To reduce AIDS transmission, it is important that ‘commercial sex workers’ practice safe sex. In this study authors estimate the compensating differential for condom use among sex workers in Calcutta. To identify the relationship between condom use and the average price per sex act, they follow an instrumental variable approach, exploiting an intervention program focused on providing information about the AIDS virus and about safe sex practices. Using this method, they found that sex workers who always use condoms face a loss of 79 percent in the average earnings per sex act;

“In many ways the market for sex work is simply another labor market. Sex workers in the red light area of Sonagachi in Calcutta who are the focus of this paper are almost always part of a brothel under the ownership of a madam or pimp. They are required to pay fifty per cent of their earnings as rent and "protection" to the person controlling the brothel. The market is quite competitive with over 4,000 sex workers working in 3 70 brothels servicing about 20,000 clients a day. Calcutta is one of the world's largest cities with an estimated population 13 million of which 31 per cent are migrants. This results in a male dominated sex ratio with 0.83 females for every male in the population that in turn causes the demand for sex work to be consistent and high. Sonagachi is the oldest and best established red-light area in Calcutta and has been in existence at least for 150 years. It is located close to Calcutta University which provides a steady source of clients, and like many other older Calcutta neighborhoods consists of a dense network of narrow, winding streets lined by two and three story buildings. The brothels are supported by a number of restaurants, teashops, bars and other businesses that serve sex workers and their clients in the area…..While rates are to some extent determined by negotiation, the market is large and competitive and there is a good sense of the "correct" wage or price with differences arising from the sex workers age, physical attributes and her level of education.”

Some Policy implications;

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