Prude, Prostitute, Pimp and Pareto

Abstract

Once upon a time there lived two dressmakers, Maggie and Melissa. They had their shops on the same street of a small village somewhere in eighteenth-century England. Melissa, the older of the two, was a spinster who lived alone. Maggie, younger and much prettier, was also unmarried, but she had a lover, Jack, who often used to come to keep her company on cold winter nights. Now Maggie and Jack were not very much in love, but they obviously enjoyed each other's company. And Melissa, who knew all that went on in that street, did not seem to mind; she hoped the two would get married some day and live happily ever after. In short, everyone minded their own business, and although business was never very good, it was enough to make a reasonable living. Then one day during a particularly hard winter, Melissa struck upon a new way to cut and fit her dresses. Even now we don't know what her innovation was, she kept the secret so well. But whatever it was, it was effective. Melissa could now make a dress for one of her customers in half the time it used to take her and was still taking Maggie. Needless to say, customers began to flock to Melissa's shop where they could have their dresses made more quickly, and Maggie began to feel the pinch. Eventually, unable to lower her prices so as to match Melissa's faster service, Maggie had to go out of business. In the language of the economist, Maggie was the unfortunate victim of a pecuniary externality, the stuff of competition. What was a young girl to do? Having no other skills than dressmaking, Maggie was forced to turn to the only other profession she knew, the world's oldest. 'Henceforth', Maggie announced to Jack, 'if you want to stay the night, it's going to cost you.' For Jack this was certainly a comedown from the status quo ante; but having Maggie's company was better than doing without, even at the new price, and so he agreed. Now it wasn't long before Melissa learned of Maggie and Jack's new contractual relationship. It offended her deeply, so much in fact that she actually admitted that she would have preferred things as they were before her innovation in dressmaking to things as they were now with her living and doing business 'on the very same street as a prostitute'. Her customers tended to agree with her on this and the question naturally arose in other people's minds as to why Melissa and her clients