One area of "economics" which I have recently become very interested in and which is almost completely ignored in neoclassical theory is non-market, black-market, and unquantifiable transactions. Many neoclassical economist dream up a world where informal or illegal transactions, drug smuggling, human trafficking, slavery, bartering, arms flows, money laundering, etc., don't exist, and theorize around this illusion. Fortunately, non-economists have filled the void, analyzing the effects that the "illicit" has on the global economy. Carolyn Nordstrom, an Anthro prof. at Notre Dame, has spent years analyzing illicit economics and illegal networks, finding out how astoundingly large, organized, and powerful they are. She has written several papers ("Invisible Empires" is a good, concise one and can be found in the library database) and books on the subject. She explains that the influence of these illegal networks can have far-reaching macroeconomic effects, affecting things like interest rates and inflation. Of course, illegal transactions are more common in developing nations (the movie Blood Diamond actually does a good job exposing how diamond smugglers were able to circumvent international embargoes to sell diamonds which were providing money to buy arms, which were also smuggled, for the warring groups), but some estimates have claimed that 20-30% of the US economy is illegal (the definition of illegal is somewhat ambiguous here, but we are still talking TRILLIONS of dollars...). Anyways, it is interesting stuff to think about.
Sean
p.s. for any of you grammar fiends out there, I always get confused about whether to italicize or quote paper titles, book titles, and movie titles. I apologize if my previous post contained such errors.
p.p.s. does anybody else have this problem too? If so, please tell me so I don't feel so bad...
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2 comments:
I wish I could answer your grammar questions with certainty. I was tought to underline books, put quotes or italics for papers, and italics for movies. Anyways, just a little tidbit about illegal economies. I learned in my intermediate macro class that the scale of the black market is measured in the US often by looking at the amount of cocaine residue on a sample of greenbacks. Seems a little iffy, no?
Thanks for the grammar help.
As for the cocaine thing, it is very iffy, especially since drugs is only one factor in illegal economies. Arms, resources, people, and even seemingly negligible things like clothes and food are involved. What makes this particular aspect of the economy difficult is the near-impossibility of precisely measuring it. Unfortunately, many economists take the "if we can't measure it, we should just ignore it" approach, or use very questionable methods, like measuring cocaine residue. I also wonder what methods are used in countries where the drug trade does not exist or is minuscule?
I guess the big, over-arching question is: what do we consider "the economy"? Should it be only the things which take place through transparent, legal transactions? If that is all we look at, what impact does what we don't look at (the illegal) have on the way we measure and see what we do look at?
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