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).
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).