Sex Drugs and Econ

June 7, 2018 Sports

Economics also is helpful to make apparently inexplicable aspects of human life clearer, such as why persons engage in risky activities more as teens than during other periods of their life, or why people chose to take illegal drugs. Coyle begins her book with perhaps the most unpredictable and irrational aspect of human life of all—sex. She asks, from a supply-side point of view, why do sex workers ask such high prices for their trade and eschew bargain prices? Theoretically, competition should keep wages low. But, like “competitive athletes and bond salesmen,” sex workers know their careers are likely to be short-lived. 4) Thus, all wage costs in the sex industry, tend to be quite high, making prices fairly inelastic. Also, the supply of labor is inelastic, as not all persons are willing to make themselves available for hire in the sex industry for moral reasons, or are able to ‘sell themselves’ for aesthetic or demand-related reasons. Furthermore, the high entry barriers to the industry, in the form of the criminal element a seller must deal with to enter the market, creates high entry barriers that make prices sticky, or unresponsive to demand.

High levels of market segmentation, and little product differentiation in the eyes of consumers also allow purveyors to change high prices, as a consumer seeking one source or type of pleasure will be reluctant to seek other forms of pleasure or see the two as similar enough to function as substitute goods. (4) The fact that customers are mainly men limits the available market, too, to sellers, causing sellers to keep prices high. However, the Internet has reduced barriers to entry into the industry. The overhead of maintaining a shop, even of hiring models to pose for pictures now that computer graphics can substitute, has reduced costs.

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The Internet has also increased demand as it has taken away much of the embarrassment of ‘real life’ purchasing. Thus, technological change can fundamentally change both the supply and demand sides of the equation of any industry. Coyle analyzes the drug industry to examine the ways in which the industry functions much like a legitimate market. For example, dealers give away free samples, like marketers do with new forms of soap or shampoo, to get potential customers addicted or ‘hooked’ upon the product. 9) However, despite the fact that up to 50 percent of Americans have tried some form of illicit drug, not all drug consumers become hooked—the core market of persons who are addicted drive the incentive of sellers to continue to supply their habit, and the lack of comparable substitute goods for growers that yield a competitive profit creates an incentive to maintain the supply of the drug. (10) Coyle notes that the principles of classical economics are not always perfectly descriptive of modern human behavior in all spheres, on their surface.

Take, for example, teenagers. Classical economic wisdom holds that human beings are risk-averse and weigh the possible consequences of their actions. It seems like “most teenagers don’t act like economists,” given this analysis. (19) Teens take a very different view of the likely future consequences of various options. This is because teenagers face different opportunity costs than adults do. Teens “don’t suffer the same costs from sleeping off a hangover most mornings rather than holding down a regular job,” as an adult. 20) However, on some level teenagers are still operating according to rational choice theory. Their perceived balance of probabilities about future outcomes are different than adults as their levels of societal responsibilities are different, so teenagers indulge in risky behavior and place immediate gratification higher than adults as a priority. Just because something is rational, teenage behavior shows, doesn’t mean that it is good, Coyle demonstrates in her examples—consider how government subsidies have made overproduction of foodstuffs profitable for agricultural businesses. 39) Also, some industries, like the sports industry, illustrate how economic principles do not universally apply in the same way to all industries—for example, unlike most companies, sports teams do not want a monopoly, because the purpose of the contest is what spectators pay to see in a competitive arena. Sports require large economics of scale, or a great deal of competition, to become profitable. Coyle’s chapter on music to explain the idea of “marginal cost” is especially interesting to view, in light of how technology has had such a significant impact upon the industry. Who can doubt that accessing music online and storing on the new generation of portable devices like MP3 players is going to be the next wave,” given the prohibitive costs consumers of music have so long endured, when at the mercy of the recording industry? (32) Coyle suggests that the reason that Napster and similar Internet file-swapping services grew so popular was because the robber barons of the music industry took advantage of customers for so long, charging, for example, a huge price markup on the same piece of plastic in different countries and at different venues.

This may have seemed economically rational for the suppliers at the time, given the limits on competition. But the pace of technological innovation (such as the development of better recording devices) that initially allowed the music companies to try and grow bigger and more dominant in their market was almost the source of their downfall, as increasingly price-strapped consumers looked for other, even illegal, options.

Although Napster is no longer a legal debate within the industry, there is no doubt that Internet single-song buying has significantly diverted profits away from the music companies who long relied on the fact that they could produce many, many songs with little marginal cost, or added total cost per unit produced, on CDs and sell them at a huge profit.

Perhaps Coyle’s most timely article, however, is her chapter on immigration to explains the concept known as the “lump of labor fallacy,” that is, that there is a finite number of workers for a finite number of jobs While there has been an increase in illegal immigration, deliberate government restrictions have prevented legal immigration reaching same heights they reached (in proportionate terms) during the first part of the 20th century.

However, the balance of evidence suggests immigration puts little or no downward pressure on wages in practice, given the type of labor recent immigrants, especially in the United States, are likely to assume, making it rational, Coyle argues, to change current policies. (144-142) In fact, given the graying population in many European countries immigrants could provide an important infusion of new workers.

The lack of European and Japanese immigration is why those nations are on the “verge of shrinking and already aging rapidly,” while the United States remains an exception, “mainly because of high immigration: it has immigrant groups with higher birthrates than the native-born population, and constant top- ups from new immigration. ” (149) Immigrants pay “taxes like everyone who goes shopping or has a (legal) job. (145) There are also many historical examples as to the benefits to society regarding immigrations: “Would the City of London be the great financial center it has become without Jewish immigration in the nineteenth century? Would American universities dominate the global intellectual landscape without the influx of refugees from the Nazis? ” (147) Immigrants bring new skills, youth, and also are willing to accept different forms of labor than native-born workers are, and thus workers are not perfect substitutes for one another, in terms of analyzing the employment prospects of a nation.

Coyle in some of her chapters, such as the above-cited chapter on immigration, clearly has a political bias. Her most openly prescriptive, rather than descriptive chapter is her analysis of public health and disease, in which Coyle analyzes how better health improves the economic health of all society. Countries that have inadequate public health systems are more likely to have epidemics, thus “a healthy population is a public good” for all persons, and should be supported by government policy. 124) After all, she points out, an unhealthy society where people lack health care and adequate nutrition means a more disease-prone and unproductive community. But even if the reader does not agree with all of Coyle’s politics, there can be no doubt that her book makes the theoretical principles by which most economics operate far more understandable, and her willingness to take into consideration the many exceptions to the laws of supply and demand is also refreshing as well.


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