# The net economic costs and benefits of activity in the black economy varies depending on the type of activity and the context. Often black market activities may benefit the direct participants in ways that are harmful to others, such as the buying and selling of stolen property. Black market activities of certain types can create clear and unambiguous harm to society, such as murder-for-hire services. Other activities in the black market may not cause direct economic harm to anyone but can reduce the effectiveness of social institutions that benefit all of society, such the poaching of wildlife, illegal dumping of toxic waste, or the evasion of taxes used to pay for legitimate public goods.

Source: https://www.investopedia.com/terms/b/black-economy.asp

Venezuela totally works on a black market economy, to state it shortly.

In the short time black Economics can help a country's economy but in the long run this will ruin a country's economy.

It seems to me that the example I gave gives an instance where black economies did help but over time it probably doesn't. The non-paying of tax clearly prevents economies from developing and countries where imbalances are created, such as recently Greece, show problems that can evolve.

Nevertheless, economies are complex and sometimes may not behave as we think they should.

In certain situations proper to specific countries this could be possible. The South of Tunisia could be an interesting case study.

Zied, can you elaborate. I do not believe it is always straighforeward, but nevertheless many poor countries have limited or poorly devised taxation systems.

The work of Hazel Henderson is of help, in this case; her research pointed to the many factors that contribute to an economy, e.g. unpaid labor. What we measure and publish in official economic statistics definitely implies many 'blind spots'.

The taxation issue in general is a key topic for economic reforms, land value taxation and taxing economic rent included. Most tax-funded state bureaucracies (the redistribution machinery included) need a least 2-3 Euros to place 1 Euro. In this sense, the informal economy is a self-help system for the poorer strata of any society; and: poverty has already reached the middle sections of most societies.

Mrs. Thatcher opined that society per se does not exist, only the economy of a country; she was unable to understand the economy in a social context, which may have been her greatest weakness, despite being 'reform strong' and a very decided person, concerning many important political issues.

Stephen,

My views on Mrs Thatcher are similar to many people's on Trump.

She did control the escalating power of non-elected officials, that is union leaders, who were creating a path to long term disaster, but she increased poverty for many people as well as alienating the Scots from Westminister, with the present result. Mrs Thatcher closed almost all the public toilets in London in order to cut back on public spending causing the city to smell like a urinal.

The problem though is economically there is no evidence her intentions worked and that increased monies for the already wealthy or those striving to be wealthy positively affected the economy. My point is that it was the black economy that she unintentionally created that aided the UK economy not the giving of tax bribes to the wealthy.

Like Blair, Thatcher increased her personal wealth in office, received a million pound gift of a house in a wealthy area of London from a building tycoon and had few genuine economic ideas beyond a return (in all its absurdity) to Victorian economic values. Having a concise or precise personality, functioning amongst weak men, does not mean intellectual clarity.

We do understand the negative impacts on taxation and economy due to lack of documentation of parallel markets or black economy but it does give a buffer to the overall economy specially when the global economy is effected due to any reason or shock. for example the sub prime mortgage crises . The under developed economies having bigger black markets were effected less as compared to developed economies.

Forget Thatcher history and experience for the moment...let's stick to the question.

The "underground", "hidden", "black", "unrecorded" economy, or whatever appellant one wishes to give it, has been a reality of economic activity for as long as man has had in his mind the idea of either recording all economic activity (which of course is simply a crazy notion and simply impossible to implement, or that of taxing all economic activity.

It is in the latter context that what is in fact an eternal, probably simply impossible, context, the eternal cat and mouse tussle was born and remains for ever with us. The Latins have a saying "Factum lex inventa fraus" which, roughly translated means that the moment that any law is enacted a process of smart inventing of how to get round it will have immediately been born. Edward Kane (US) conceived something similar when he wrote extensively about "the reregulation concept".

There is no government in the world that can manage to bring within the sphere of its control and recording all types of economic activity taking place on its territory. Even at the height of communist tyranny within the Soviet Union private small (two meteres by two metres, or even less) pieces of soil in people's ground floor residences used to produce totals of a specific agricultural product that at times even exceeded thopse of the state-run massive agricukltural tenures.

So we are agreed on the underground economy's ensured life. The real problem lies in its composition. Because as we all know it has come to include both good (e.g. private agricultural produce e.g.) and bad human activities. Criminality, money laundering, all sorts of mafia, camorra, 'ndragheta, drug businesses, corrupting of politicians, and what else, well all of this in fact has a monetary value, even if never ever anywhere recorded, which simply never gets into the national economic statistics.

All of this makes statisticians' lives simply miserable...they will produce figures for GDP and GNP which they themselves know do not reflect reality in that there is so much economic value being produced which is "bad" but which is produced neverteless. I often use with my students the example of the loaded revolver being turned round on a table in some sort of Russian routlette game or questioning of a captive exercise. The gun is in fact "economic prioduct", albeit a bad thing, and this is because economics is neither moral nor immoral, but simply "amoral".

So the simply impossible quantum to factually measure of underground economic activity that is present in every economy is an undeniable reality.....I am sure my readers will start taking all national, and international, GDP statistics with a pinch of salt from now on !!!!

Dr. John Consiglio

Faculty of Economics, Management and Accountancy,

The Ubniversity of Malta .

Thanks John Consiglio,

Although I understand what you mean by economics not being moral but I doubt that is simple either. Declaring an activity immoral, you give examples above, is often employed instead of taxed or not taxed activities. The immorality of the drug trade is the result of certain drugs be designated bad, and others good. Those subject to taxation are thereby good. But its more complicated than statistics.

Yes, of course, you make very good distinctions, clearly all clear and correct within the context of the drift of my points.

I have supervised various students' research over my years in academia, and previously also when a banker for some 42 years...and I have always been awestruck with the wide ranges of percentage differences (i.e. underdeclaring????) from any country's declared official GDP that such research comes up with. I had students declaring that Malta's GDP is undeclared by as much as 40% of its shown GDP lying in its undeclared economy....others have said that it is in the regions of 20%...what can one believe?.....

Thank you always..

I.A. worth noting although it does not fit your above assertions, but taxation provides authenticity, symbolic respectability. All kinds of drugs are freely available and used but although they often have similar effects, taxed ones are considered benevolent and untaxed ones harmful.

My view is that everything that involves exchange, goodwill between exchanges and further development of relationships is economics.

A black economy exists because of unlawful activities - like smuggling, gambling prostitution, human trafficking or other unlawful activities. It could be caused by taxation or goods that are deemed socially undesirable. Some of these contraband activities can be legalized like prostitution and gambling. Others can be discouraged by changing the tax system.

Chung Tin Fah,

I immediately thought of 17th and 18th century British smuggling, caused by government desire to restrict trade in certain products and thereby harming local economies and by its action threatening economic growth and livelihood.

Smuggling and piracy in some parts of the world have been created by governments imposing restrictions on poorer countries. Criminal activities are thereby resorted to out of desperation.