Why not? Matt Yglesias objects to my post yesterday, holding it up as an example of why nobody likes economists. He says that my analysis ignores the fact that “big part of the point of prostitution prohibition laws is to express social disapproval of prostitutes and prostitution”:

Indeed, people seem generally quite unconcerned about whether prostitution is occurring someplace out of sight and out of mind. But they want to reserve the right to strongly disapprove of both the prostitution and especially the prostitutes. You can analogize a person who engaged in a form of sexual or commercial conduct of which you disapprove by referring to that person as a “whore.” It’s an insult. Its insult status reflects and upholds a social consensus that whores are bad people, not just that whoring is a kind of undesirable nuisance. Side-payments can’t address this issue.

The first thing I would point out is that he seems to agree with me with respect to the actual welfare analysis of the voluntary exchange of prostitution.  This at the very least suggests that there should be a pareto improving legal framework where the only effect of the law is that any visible signs of prostitution are banned, including advertising, streetwalking, etc. This would demonstrate social disapproval while allowing exchange. It also suggests that given that there are anti-prostitution laws, the optimal enforcement, with the exception of the public nuisance element of streetwalkers (which I’ll talk about later), should be zero.

Is this what we observe now? Crackdowns on very secretive and high-priced prostitution rings do occur, and Rhode Island recently passed a law that moved the state from legalized behind-closed-door, no advertising, prostitution to full prohibition.

The other, arguably more important, issue raised here is that I was specifically addressing externalities of prostitution. Should people’s preferences over laws regulating some good or service be considered externalities of that good or service? I think the answer here is clearly no, since they are unrelated to the quantity of the service produced.

However, one might still argue that these preferences should be included in welfare analysis as a cost or benefit of the law. This is an interesting question.

One concern here is that voters have preferences over most laws, and as Bryan Caplan argued in The Myth of the Rational Voter, those preferences suffer from fundamental biases not related to the costs and benefits of those laws. He documents 4 biases:

1. Make-work bias

2. Anti-foreign bias

3. Pessimistic bias

4. Anti-market bias

If we are to accept that voters preferences over laws -as opposed to preferences over the direct outcomes of those laws- should be included in cost benefit analysis, then we should be prepared to consider laws which satisfy voters inherent anti-foreign bias as a legitimate benefit.

One could argue that public policy, and cost-benefit analysis therein, should not weigh the enjoyment some get from lowering the status of others. When weighing protectionist measures, for instance, should we consider the fact that they satisfy anti-foreign bias as a benefit?

Then again, one could make an argument that the costs and benefits of the expressive value of laws should be taken into consideration. After all, if laws lower the status of some group, and they have negative disutility from that which they’d be willing to pay to remove, then that is a real cost. When framing the problem as one of harming some group like this  it seems more worthy of consideration. But both costs and benefits must be considered. This would mean weighing the cost of lower status of prostitutes against the benefits of those who wish to lower their status. Likewise one could weigh the benefits of satisfying anti-foreign bias against the costs to those of us who find that bias reprehensible.

Matt seems to think the reason people don’t like economists is because they miss these things or they ignore them. That’s a fair enough criticism (although again, in my case I was addressing the particular question of externalities). But he should consider Robin Hanson, whose willingness to wrap any cost or benefit into welfare analysis, no matter how egregious, is surely the purest form of economic thinking. No offense to Robin, but I don’t think people would like economists more if they all conducted economic analysis more like him.

More on streetwalkers later.