Sunday 8 November 2020

The story of sexual economics should not be written by psychologists

On Thursday, I posted about the economics of sex robots. In particular, I drew attention to search models as a way of thinking through the economics related to sex. The key driver in a search model is the relative bargaining power of the parties to the agreement. If some change gives a party more relative bargaining power, they will get a better deal.

However, search models are not the only way to think about the economics of sex. This 2017 article by Roy Baumeister (Florida State University) and co-authors, published in the Journal of Economic Psychology (open access), instead uses the workhorse model of microeconomics - supply and demand. They note that:
Sexual economics theory rests on standard basic assumptions about economic marketplaces, such as the law of supply and demand. When demand exceeds supply, prices are high (favoring sellers, that is, women). In contrast, when supply exceeds demand, the price is low, favoring buyers (men)...

Importantly, they aren't describing the market for sexual services (i.e. prostitution). Instead:

 ...often what is sold is not just sex but exclusive access to sex with a particular person.

How do Baumeister et al. justify their theory? As follows:

The core idea is that women are the sellers and men are the buyers. This starts with the abundant evidence that ‘‘everywhere sex is understood to be something females have that males want”...

Because the man typically wants sex more than the woman, she has a power advantage. According to the ‘‘principle of least interest,” the person who desires something less has greater control and can demand that the other (more desirous) person sweeten the deal by offering additional incentives or concessions... Hence sexual economics theory begins with the assumption that female sexuality has exchange value, whereas male sexuality does not...

In return for sex, women can obtain love, commitment, respect, attention, protection, material favors, opportunities, course grades or workplace promotions, as well as money. Throughout the history of civilization, one standard exchange has been that a man makes a long-term commitment to supply the woman with resources (often the fruits of his labor) in exchange for sex — or, often more precisely, for exclusive sexual access to that woman’s sexuality. Whether one approves of such exchanges or condemns them is beside the point. Rather, the key fact is that these opportunities exist almost exclusively for women. Men usually cannot trade sex for other benefits.

The onset of a sexual relationship thus involves the man and woman choosing each other. In perhaps overly simple terms, he chooses her presumably on the basis of her sex appeal, that is, how much he expects to enjoy having sex with her. Meanwhile, she chooses him on the basis of the resources he can provide, that is, on the basis of nonsexual benefits he can furnish to her. This exchange defines the nature of the same-sex competition. Women compete to seem more sexually attractive than their rivals. Men compete to seem a better provider than their rivals.

The rest of the article describes differences in competition between women, and between men. It is interesting to read, but I'm more concerned about the framing of the model. It's not clear to me that the authors, all of whom are psychologists of various types, have really thought through the plausibility of the economic model they are attempting to use.

The basic model of supply and demand relates to a perfectly competitive market, which has a number of characteristics: (1) many buyers and sellers; (2) homogeneous 'products'; (3) complete information; and (4) no barriers to entry into or exit from the market. Under those conditions, neither buyers nor sellers have any control over the price - they are 'price takers', and the market 'price' is determined by the interaction of supply and demand.

Now, thinking about sexual economics, it's not clear to me that either (2) or (3) is satisfied. Every person is different, with different preferences. So, the assumption of homogeneous products cannot be fulfilled. Also, we don't know everything about other people we might like to match with (at least, not at first, so complete information is also not available. So, the market is not perfectly competitive, and therefore cannot be described by supply and demand curves. [*]

Another important problem is that, in the supply and demand model, sellers can sell more than one unit of the product (in fact, they will continue to sell until the point where their marginal cost of production is equal to the price), and can sell to more than one buyer. And buyers will buy more than one unit of the product. None of this seems to be a fair characterisation of sex (unless psychologists inhabit quite a different world from the rest of us).

Now, if you read through the quote from the Baumeister et al. article above, and then go back and read my description of search models from Thursday's post, it should be immediately clear that the search model is a better characterisation of sexual economics. Moreover, it doesn't rely on the assumptions of homogeneous products or complete information, and definitely copes with faithful matches between single individuals.

The sad thing is that the rest of the Baumeister article is, as I said above, really interesting. And, the narrative probably stands up well if you take out the supply and demand framing, and replace it with a framing based on a search model. Someone needs to re-write an improvement on that article.

*****

[*] I'm being a little bit harsh here. As I note in my ECONS101 class, even though the demand and supply model relates to perfectly competitive markets, it still does a good job of describing qualitatively the changes in the price and quantity that will result from a change in market conditions, even when the market is not perfectly competitive.

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