How criminal law shapes institutional structures: a case study of American prostitution.

Author:Simowitz, Aaron D.
 
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Abstract

Prostitution in the United States in the early 19th century was an almost entirely individual, ad hoc, unorganized activity. In the 1910s, the Progressive Movement arrived, bringing with it enforcement of harsh criminal penalties of prostitution for the first time. Within a couple of decades, a rigorously structured, commercialized prostitution industry emerged. Prostitution transformed from a practice into an institution.

This Article lays out a new theory among the unintended consequences of criminalization. Criminalization has the potential to push previously unstructured, independent, ad hoc behaviors to become structured and organized. The Article examines this relationship in the context of American prostitution from the 1850s to 1930s, using contemporaneous sources to tease out the organization of American prostitution before and after the criminalization wave of the Progressive Era. The Article then examines the economic principles that underlie this relationship, including how criminalization creates economies of scale in bargaining for government corruption. In conclusion, the Article argues that policymakers can recognize and respond to this problem in shaping criminal sanctions. Certain criminal regimes, such as partial criminalization that focuses penalties on the purchasers, rather than the sellers of sex work, may alleviate this institutionalizing effect of criminalization and avoid the harms associated with more complex and persistent institutional criminal structures. The Article thus gives theoretical support for current experiments in New York and Sweden in partial criminalization of sex work.

TABLE OF CONTENTS INTRODUCTION PART I---AMERICAN PROSTITUTION BEFORE THE PROGRESSIVE ERA: THE INDEPENDENT CONTRACTOR PART II--FROM REGULATION TO SEGREGATION TO CRIMINALIZATION: PROSTITUTION AND THE PROGRESSIVE ERA PART III--PROSTITUTION POST-CRIMINALIZATION PART IV--UNDERSTANDING AND AMELIORATING THE CONNECTION BETWEEN CRIMINALIZATION AND INSTITUTIONALIZATION A. Absence of Enforceable Contract or Property Rights B. Allocation of Risk to the Lowest Bargaining Power Party C. Criminalization Introduces Economies of Scale D. Objections and Responses E. Institutionalization and Partial-Criminalization 1. Legalized Prostitution in Holland: Persistence of the Independent Contractor Model 2. Sweden and New York: Experiments in Partial-Criminalization 3. Partial-Criminalization Has the Potential to Weaken the Levers that Connect Criminalization and Institutionalization CONCLUSION INTRODUCTION

Prostitution in the United States in the early 19th century was an almost entirely individual, ad hoc, unorganized activity. Outside of major urban centers, prostitutes were, for the most part, "kept women" who lived with a man, trading housework, cooking, and intimate relations for a roof over their heads and, occasionally, money. (1) Even in New York City, where brothel prostitution increased sharply after 1820, each brothel functioned as an independent enterprise, typically with a landlord who rented the property to a madam. (2) In the 1910s, the Progressive Movement arrived, bringing with it enforcement of harsh criminal penalties for prostitution for the first time. (3) Within a couple of decades, a rigorously structured, commercialized prostitution industry had emerged. (4) Prostitution had transformed from a practice into an institution and business. (5)

This Article will examine the relationship between criminalization and institutionalization, focusing on the development of American prostitution. By criminalization, I mean not simply the existence of de jure criminal sanctions, but the coupling of de jure criminal sanctions with de facto enforcement. As this Article focuses on the effect of a new criminal regime (on-the-books law and enforcement), it also tends to focus on the effect of "criminalization waves"--recognizing that criminalization waves may have different effects than older criminal regimes where enforcement may be more sporadic or arbitrary. (6) By institutionalization, I mean the transformation of a behavior or industry from an independent, ad hoc, loosely interconnected (or unconnected) model to a structured, corporatized, and interconnected model. In short, this Article posits that criminalization gives rise to institutional structures that would otherwise not exist.

The Article takes as its foundation the seminal literature on the economic theory of the criminal firm, which explored, among other things, how criminalization could lead to monopolization. The Article seeks to further examine this phenomenon and to add a new theory of the relationship between criminalization and particular institutional structures. There is a rich and varied literature on the unintended effects of criminalization, (7) but it has not focused on the relationship between criminalization and organization. More specifically, it has not to this point explored the potential relationship between new criminal regimes and the organizational restructuring of the behaviors now criminalized.

I present American prostitution as a useful case study for several reasons. First, prostitution lacks endogenous stimuli to organize and institutionalize. (8) Indeed, pre-criminalization American prostitution demonstrated many of the canonical benefits of institutionalization--for example, specialization and reduction of search costs--without incurring the associated costs of institutionalizing. (9) Second, the prostitution literature strongly suggests that prostitution has significant endogenous diseconomies of scale--most notably, that the working conditions and compensation for the sex workers appear inversely correlated to the size and organizational rigidity of the sex work operation. This points to a role for criminalization. Third, the institutionalization of the 1920s and 30s is well documented in contemporary sources (prostitution was "Highly Organized Now," trumpeted the New York Times in 1936) (10) and the structure of pre-criminalization prostitution is ascertainable from a variety of contemporary sources, many of which have received scant attention.

In the prostitution context, we can observe several of the economic forces underpinning the link between criminalization and institutionalization. First, criminalization strips away legally cognizable contract and property rights. This eliminates the ability of individual sex workers to make enforceable bargains and the ability of independent operators to use legal mechanisms to resist would-be monopolists. Institutionalization increases the ability of sex workers to enforce bargains through non-legal means. Institutionalization also flows from would-be monopolists consolidating the market now that independent operators no longer have any legal mechanism to push back against takeover. Second, the prostitution market--like any functioning market--will redistribute new costs to the lowest bargaining power party. In the prostitution context, this typically means shifting the costs of criminalization to the sex worker--more rigid, institutionalized structures make this redistribution possible. Third, criminalization introduces economies of scale--for example, economies of scale in bargaining for government corruption--that may have been absent prior to criminalization.

Criminalization's role in prompting the growth of institutional structures will color not only the decision of whether to criminalize an activity," but will also inform the mode of criminalization, as certain regimes can best avoid or mitigate the growth of institutional structures. There is more than one way to criminalize an activity. Some modes, such as the Swedish model of criminalizing purchase, but not sale, of sex, may minimize the economic levers that link criminalization to the growth of institutional structures. (12)

Underlying this entire discussion is an assumption that institutionalization may have harmful consequences. The literature on prostitution bears this out. Legislatures, (13) courts, (14) and commentators (15) have noted that, from a harm perspective, more structured, organized systems of prostitution (principally pimp-controlled prostitution) tend to be more brutal and exploitative. This raises the possibility that, even if criminalization reduces the absolute amount of an activity, harm may actually increase. (16) Institutionalized systems may also have additional negative externalities--for example, institutionalized prostitution proved to be highly effective at procuring government corruption. (17)

Part I of this Article will examine the practice of prostitution in North America prior to the prohibitionist and criminalization campaign ushered in by the Progressive Era. Part II will examine this campaign and the immediate effects it had on the organization of prostitution. Part III will demonstrate that prostitution, particularly in urban centers, achieved a remarkable degree of organization and structure shortly after criminalization. Part IV will set out an analysis of the forces behind the criminalization-to-institutionalization link, and show that the independent contractor model that typified the 19th century in North America remains prevalent in the Dutch system of prostitution, a radically different framework owing to the absence of complete criminalization. (18) The Article concludes with a discussion of the policy implications of better understanding the relationship between criminalization and institutionalization, arguing that a regime of partial-criminalization that penalizes the purchasers, but not the sellers, of sex will weaken the link between criminalization and institutionalization. The Article thus provides theoretical support for recent experiments in Sweden and New York in one-sided policing of prostitution.

PART I--AMERICAN PROSTITUTION BEFORE THE PROGRESSIVE ERA: THE INDEPENDENT CONTRACTOR

Prostitution was not particularly widespread in colonial...

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