
Including Illegal Activity in the U.S. National Economic Accounts [pdf] - benbreen
https://www.bea.gov/system/files/papers/WP2019-4_4.pdf
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wheels
I've often wondered how this should be dealt with in countries (specifically
thinking of Eastern Europe) where large potions of the economy are off the
books. I've assumed it would significantly skew GDP / GDP per capita figures
if such values were included, and wondered how it would affect general quality
of life indicators in places where even engineers often work in the unreported
economy.

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H8crilA
Adding grey zone activity to GDP numbers a great trick to increase the
available govt debt ceiling without compromising the debt/GDP % numbers. I'm
wondering if the US will do the same, given how large the deficit already is.

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hurricanetc
Neither party in the US actually care about the debt or deficit.

If we add illicit activity into the GDP it will be so that whoever is
President can claim more GDP growth.

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rayiner
The chart of illegal drug expenditures as a percentage of average person
consumption is wild. People did a lot of drugs in the 1970s and 1980. “In
total, this paper calculates that illegal drugs accounted for 5 percent of
total PCE in 1980. This high expenditure share is consistent with
contemporaneous reports. For example, a Washington Post article estimated that
Americans bought $35 billion of cocaine (O’Toole 1981).” That figure has
fallen to under 1% today. Maybe the war on drugs worked.

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peterwwillis
Going from "we don't use as much coke as in the 80's" to "the war on drugs
worked" is a bit like going from "we have less teen pregnancy now than in the
90s" to "abstinence worked". It's not only ignoring a very large number of
alternate factors, but it's assuming the latter is a successful strategy, when
all of the evidence points to the contrary.

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eanzenberg
Interesting you bring up abstinence because kids are having way less sex
nowadays than in the past.

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kingkawn
Most definitely not because of abstinence education

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bb2018
Adjacent to this, has anyone ever seen statistics/estimates on income
percentiles of illegal/underreported income? I've always wondered about this
as a huge portion of jobs is based off tips or cash transactions (servers,
contractors, maids, landscapers) and I can't imagine all these people report
100% of their income.

What percent of of the US population would you estimate doesn't report at
least 10 thousand dollars a year?

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jimbob45
The standard deduction removes this as a concern for most Americans.

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bb2018
I'm a really naive when it comes to tax law and a lot of economics statistics
- but I'm having trouble seeing this.

If I am a waiter who made 35,000 in reported income and 10,000 in unreported
income I made 45,000. I can take the standard deduction on 35,000 and in all
statistics used by think tanks/reporters/politicians I will weight in the
category of those who made ~35,000. Am I missing something?

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thenewnewguy
No, your parent poster is completely wrong. You'll pay more in taxes reporting
45k with the standard deduction than if you report 35k with the standard
deduction. The only scenario in which the standard deduction "fixes" this
issue is if it reduces your taxable income to the point where you do not owe
income tax regardless of if you report that extra income or not.

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netsharc
When Italy started including this stuff in their economic report, the joke was
that the change happened to make their economic numbers look better...

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iudqnolq
How could it not? Supposing illegal activity exists, including it will
increase GDP. GDP per capita could decrease if you suddenly count people you'd
missed, I suppose, but I doubt that that'd be significant.

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TheSpiceIsLife
Here’s similar information from the Australian Bureau of Statistics

The Non-Observed Economy and Australia's GDP, 2012 - Measuring Illegal
Production

[https://www.abs.gov.au/ausstats/abs@.nsf/Products/5204.0.55....](https://www.abs.gov.au/ausstats/abs@.nsf/Products/5204.0.55.008~2012~Main+Features~Measuring+Illegal+Production?OpenDocument)

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joncrane
It would be interesting to see the proportion of legal to illegal economic
activity over time.

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topkai22
For the types of illegal activity measures here, the paper provides that in
the figure measuring revision to nominal GDP. Basically, it peaks in the 70s
around 4% of GDP and declines to around 1.67% today.

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joncrane
Thanks!

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bargle0
The BEA is an interesting little bureau. They have to resist a lot of pressure
both from politicians and law enforcement.

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wbl
The most amusing part is stagflation disappears when coke is included.

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seibelj
I almost always tip in cash, and I frequent the same places so the service
employees learn who I am. And they love my cash tips! You will get better
service if you leave a $5 bill in cash rather than credit. Every bit helps.

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tonyedgecombe
So you think people who receive part of their pay in cash should be taxed less
than people who don't?

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esotericn
Presumably they think that everyone should be taxed less, but that this
approximation is the best they can do.

