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During my research on the topic of why we have pubic hair, I found that most sources agree: there is no definitive reason why we have pubic hair.

The most plausible and widely accepted reason why humans have pubic hair is related to scent. Apocrine glands release pheromones, which get trapped in the pubic hair. The combination of these pheromones and decomposing bacteria that gets caught in the hair, combine to define your scent and stimulate the libido of possible partners.

Here's a few other possible reasons for pubic hair (not all of which make good sense or are generally accepted):

Some theories suggest that pubic hair is to provide warmth and reduce temperature fluctuations around the genitals. But others discount this theory, indicating that the amount of hair is insufficient to make any significant difference.

Pubic hair (and underarm hair) also functions as lubrication. Pubic hair in particular protects against the friction generated during intercourse. Under the arms and between the legs, skin on skin contact causes chafing. But the natural oils from hair and the movement of the hair itself prevents direct skin on skin contact.

Pubic hair also indicates a level of sexual maturity to other humans. The growth of pubic hair usually coincides with the arrival of the stage of puberty where reproduction becomes possible.

Cecil Adams from straightdope.com reports that a Smithsonian monograph "presents the novel thesis that pubic and axillary (armpit) hair gives babies something to grab onto". Ouch.

And finally, research indicates that humans have just as many hair follicles over their bodies as apes do; the majority of human hair is simply finer and more lightly coloured. It's been said that human body hair is just leftover from the process of evolution, when primitive humans were covered in hair to provide warmth.


Sources
Ask Alice
Wikipedia.com
straightdope.com