Is legalizing prostitution a good idea?
One approach to this question is rejecting its premise: banning prostitution is an infringement on individual rights in the first place. So while the answer to the question is "Yes", it sidetracks the real issue.
As is often the case, this kind of approach is too simplistic. It confines the issue to the intellectual plane and refuses to deal with its political aspects. (As Bismarck said "politics is the art of the possible".)
A more nuanced approach to the question, which arrives at the same answer, is to argue that legalizing prostitution is a "good" thing. This is the approach I tend to take. Clearly everything rests on proving the case.
The basic logic is: first, there are no victims involved; second, by criminalizing the act,the prostitutes are confined to the dark and are therefore more susceptible to ill treatment. So legalizing will enable prostitutes to form unions and fight for their issues. Probably the biggest concern with prostitution now is the role it plays in spreading AIDS. Legalizing prostitution helps here because it will be easier to access people and educate them.
The biggest counterargument I face is that in most poor countries (like India) prostitution is forced on young girls and legalizing prostitution will make the situation lot more dire. This is a tricky matter and it turns largely on empirical data.
This article by Nicholas Kristof cites some to conclude that it's not a good idea in India. He argues persuasively and provides lot of relevant data.
It is a must read for anyone interested in the topic.