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The Dynamic Nature of Economic Decisions

Here’s another example of where static analysis of social problems leads to destructive results. The Atlantic, a generally left-of-center magazine, recently published an article about why free-wheeling, libertarian, libertine Amsterdam is about to start regulating its legal prostitution businesses. The argument for legalizing prostitution was that bringing it out in the open reduces the need for pimps, makes it easier for prostitutes to seek police protection from rough customers and organized crime, and makes it easier to impose safe-sex practices on the trade. These are persuasive arguments; I have used them myself when I was a very earnest young Libertarian Party activist, back when pterodactyls roamed the skies, and we distributed our earnest ideas on cuneiform tablets.

But as the Atlantic article explained, that is a static analysis of a dynamic process. Legalizing prostitution made it more profitable, because it could be advertised openly, and because making it legal increased total demand for these services. Increased demand and increased profit meant an increasing number of prostitutes working in Amsterdam -- and an increase in human trafficking. Increased demand for prostitutes to work there meant more procurers importing women (and often girls) from places of desperate poverty -- and many of these prostitutes had no choice about their line of work.

Yes, theoretically, the victims of human trafficking could call the police -- but many do not speak Dutch or English, and worldwide, pimps that engage in this enslavement rely on brutality to terrorize these prostitutes into silence. A recent study of human trafficking from the London School of Economics concluded that where prostitution is legal, there is more human trafficking, because it is feeding a legal trade. Without a very thorough level of regulatory oversight, it is often difficult to distinguish lawful from unlawful trade.

One of the reasons that I have become much more conservative in my old age is the horrible realization that many ideas that sound great on a written page do not work so well in the real world, where human frailties and the dynamic response to incentives conspire to destroy brilliant theories. Abandoning existing laws and institutions should be done only with very careful consideration of why people of the past made those decisions. Sometimes, previous generations were wrong; sometimes, circumstances have changed. But the older I get, the more obvious it is that the leftist mindset has too strong a bias in favor of scrapping everything of the past simply because it of the past. I contend that an ounce of experience is worth a pound of theory; many of our traditions are the summation of decades, centuries, sometimes millennia of experience.