Nitpicking the landlord case: Banning sex for rent drives down prices.
Suppose the market rate for a room is £500 or X units of sex. Most people pay in money but some are desperate and lack £500 so they pay in sex. One day the government bans paying in sex. This is an artificial constraint on demand, some people who would have paid at the old sex rate are being prevented from doing so. When you constrain demand on something with relatively inelastic supply, prices fall. Specifically, the rooms that would have been rented for sex sit empty until their prices are lowered, the new market rate is £490.
Some people are still worse off because of this (a lot of the desperate people don’t have £490 to pay either) but there are possible values where the utilitarian calculus works out net positive (plenty of non-desperate people still benefit from lower rent). One can imagine the government in a productive role as a renter’s negotiating partner: “Gosh Mr. Landlord, I’d love to pay in sex but that’s illegal, best I can do is £490.”
This argument ignores why the price (hypothetically) goes down. The price only goes down in this situation because you just made some people homeless! If your people who were paying for rent with sex all pay for rent with money instead (and thus don’t become homeless), the price stays the same.
Not if the people paying in sex are poor! Imagine that 10% of housing is reserved for the poorest people in society as part of some government program that houses them for free, and the other 90% is rented for money at a rate of £500/month (also this is a toy model where all housing is the same, no mansions here). One day the government ends the housing program and privatizes the units, they all go to landlords who start charging money. Is the new rate for housing lower, higher or the same?
The old £500/month rate was the equilibrium that fell out of matching the richest 90% of people with 90% of the housing stock. The new equilibrium has 10% more people and 10% more housing to work with, but the added people are poorer than average, supply and demand tells us that prices will go down to reflect the average consumer having less buying power.
If you think of paying the rent with sex as “getting housing for free” and “government bans sex for rent” as “ending the free housing program”, this model applies to both cases. Assuming that people paying the rent in sex are of exactly average wealth then the new equilibrium might also be £500/month, but if they are much poorer than average it should be lower (and interestingly, if they’re richer than average, it would end up higher).
Ah that makes sense. It still feels like the mechanism here is that you reduce house prices by making people poor though (you’re reducing the buying power of these people by $500 and relying on side effects to also reduce house prices).
Wouldn’t those who are willing to exchange sex for rent still be able to do so by selling sex to other people than their landlord and using the money from that to pay the landlord? Seems like that should prevent it from changing the demand much.
Basically, your argument is that the law doesn’t prevent any homelessness contrary to what you argued in the OP because the woman can just prostitute themselves and pay the landlord?
It is worth noting that if they prostitute themselves with another person that person is going to have less power over them and thus has less ways to exploit them. The justification for the law is that the power balance is a problem.
Given how easily you change from “the law is going to leave woman homeless” to “the law isn’t going to leave anyone homeless because the woman can just engage in normal prostitution” that suggests you have a predetermined conclusion and haven’t really thought much about the effect of the law.
I think the middle paragraph of this comment is a very good point, and could easily be enough to justify the law. (The tenants has nowhere to go if the landlord gets pushy or aggressive.) However, the last paragraph I think is a bit uncharitable. The OP makes no secret of the fact that they have a certain class of laws/restrictions that they are arguing against, with this being just one example, and that loophole is specific to the example.
Given how easily you change from “the law is going to leave woman homeless” to “the law isn’t going to leave anyone homeless because the woman can just engage in normal prostitution” that suggests you have a predetermined conclusion and haven’t really thought much about the effect of the law.
Good point. I feel like it shouldn’t happen much but I agree the simple economic model predicts it should. I could resolve it within the model as some kind of market friction argument (finding someone to sell sex to is not trivial, the landlord makes it easier to go into prostitution by providing himself as a “steady employer”), but I think my real intuition is that this is a place where homo economicus breaks down so I shouldn’t be trying to apply simple economic models.
Also, even if my initial argument does work, this is basically a novel form of rent control, so the standard arguments against rent control should apply (supply isn’t completely inelastic, constraining demand will reduce future supply, which we don’t want).
If the simple economic models break down, it might be worthwhile to think about what other models apply. And also to think about how we know that the simple models break down.
Nitpicking the landlord case: Banning sex for rent drives down prices.
Suppose the market rate for a room is £500 or X units of sex. Most people pay in money but some are desperate and lack £500 so they pay in sex. One day the government bans paying in sex. This is an artificial constraint on demand, some people who would have paid at the old sex rate are being prevented from doing so. When you constrain demand on something with relatively inelastic supply, prices fall. Specifically, the rooms that would have been rented for sex sit empty until their prices are lowered, the new market rate is £490.
Some people are still worse off because of this (a lot of the desperate people don’t have £490 to pay either) but there are possible values where the utilitarian calculus works out net positive (plenty of non-desperate people still benefit from lower rent). One can imagine the government in a productive role as a renter’s negotiating partner: “Gosh Mr. Landlord, I’d love to pay in sex but that’s illegal, best I can do is £490.”
This argument ignores why the price (hypothetically) goes down. The price only goes down in this situation because you just made some people homeless! If your people who were paying for rent with sex all pay for rent with money instead (and thus don’t become homeless), the price stays the same.
Not if the people paying in sex are poor! Imagine that 10% of housing is reserved for the poorest people in society as part of some government program that houses them for free, and the other 90% is rented for money at a rate of £500/month (also this is a toy model where all housing is the same, no mansions here). One day the government ends the housing program and privatizes the units, they all go to landlords who start charging money. Is the new rate for housing lower, higher or the same?
The old £500/month rate was the equilibrium that fell out of matching the richest 90% of people with 90% of the housing stock. The new equilibrium has 10% more people and 10% more housing to work with, but the added people are poorer than average, supply and demand tells us that prices will go down to reflect the average consumer having less buying power.
If you think of paying the rent with sex as “getting housing for free” and “government bans sex for rent” as “ending the free housing program”, this model applies to both cases. Assuming that people paying the rent in sex are of exactly average wealth then the new equilibrium might also be £500/month, but if they are much poorer than average it should be lower (and interestingly, if they’re richer than average, it would end up higher).
Ah that makes sense. It still feels like the mechanism here is that you reduce house prices by making people poor though (you’re reducing the buying power of these people by $500 and relying on side effects to also reduce house prices).
Wouldn’t those who are willing to exchange sex for rent still be able to do so by selling sex to other people than their landlord and using the money from that to pay the landlord? Seems like that should prevent it from changing the demand much.
Basically, your argument is that the law doesn’t prevent any homelessness contrary to what you argued in the OP because the woman can just prostitute themselves and pay the landlord?
It is worth noting that if they prostitute themselves with another person that person is going to have less power over them and thus has less ways to exploit them. The justification for the law is that the power balance is a problem.
Given how easily you change from “the law is going to leave woman homeless” to “the law isn’t going to leave anyone homeless because the woman can just engage in normal prostitution” that suggests you have a predetermined conclusion and haven’t really thought much about the effect of the law.
I think the middle paragraph of this comment is a very good point, and could easily be enough to justify the law. (The tenants has nowhere to go if the landlord gets pushy or aggressive.) However, the last paragraph I think is a bit uncharitable. The OP makes no secret of the fact that they have a certain class of laws/restrictions that they are arguing against, with this being just one example, and that loophole is specific to the example.
I’m not the OP.
Sorry. My mistake.
Good point. I feel like it shouldn’t happen much but I agree the simple economic model predicts it should. I could resolve it within the model as some kind of market friction argument (finding someone to sell sex to is not trivial, the landlord makes it easier to go into prostitution by providing himself as a “steady employer”), but I think my real intuition is that this is a place where homo economicus breaks down so I shouldn’t be trying to apply simple economic models.
Also, even if my initial argument does work, this is basically a novel form of rent control, so the standard arguments against rent control should apply (supply isn’t completely inelastic, constraining demand will reduce future supply, which we don’t want).
If the simple economic models break down, it might be worthwhile to think about what other models apply. And also to think about how we know that the simple models break down.