Improving GDP

by on February 12, 2014 at 1:35 pm in Data Source, Economics | Permalink

Under EU rules Britain will add illegal drug sales and prostitution to its calculations of GDP:

HPost: Britain makes £10 billion a year thanks to drug dealers and prostitutes, the government’s statistics watchdog is set to confirm.

The Office for National Statistics is expected to comply with new EU rules by revealing its first estimates for the size of the illegal industries and how it has reached these calculations as soon as March or April.

Prostitution in Britain is set to be valued at around £3 billion a year while the drug dealing sector is set to be valued at £7 billion, with both of them factored into the UK’s £1.6 trillion gross domestic product, according to the Times.

Ray Lopez February 12, 2014 at 1:49 pm

Another attempt to boost GDP. At first GNP was used, then it was found unflattering to some countries and they switched to GDP. China, as is typical with communist countries, inflates their GDP by extrapolating the coastal cities like Shanghai to the rest of the country, and encouraging inflation of statistics, as they do in Argentina. This EU move is another step in this direction of puffery and fraud.

david February 12, 2014 at 2:02 pm

Conversely, understating the size of the underground economy is highly attractive when bargaining for aid – it makes you seem poorer than you really are. This is the actual motivation for the statistics rule, if you would actually click the link.

Stuart February 12, 2014 at 3:11 pm

…GDP overstating, understating, fabricating, and guessing is routine and curious. The quite foggy notion of GDP is of no practical to anyone, save politicians and bureaucrats in their posturing.

The Anti-Gnostic February 12, 2014 at 3:59 pm

An old quip: the purpose of the GDP is to make everything else look small by comparison.

CBBB February 12, 2014 at 2:41 pm

Britain makes £10 billion a year thanks to drug dealers and prostitutes, the government’s statistics watchdog is set to confirm.

One could basically just tack this onto the GDP figure for financial services, this is undoubtedly the main driver of this sort of spending.

Praxeologue February 12, 2014 at 2:44 pm

I wonder how they will adjust GDP for Wikipedia replacing Encyclopedia Brittanica.

JWatts February 12, 2014 at 5:20 pm


ohwilleke February 13, 2014 at 12:52 pm

By GDP logic this reduces GDP, which is a humbling reminder that GDP is a flawed measure of national prosperity.

The inclusion of prostitution and drug dealing, in contrast, is perfectly consistent with GDP logic and simply refines the measurement.

Alistair Cunningham February 12, 2014 at 2:50 pm

One wonders why something legal such as prostitution wasn’t already included in figures…

affenkopf February 12, 2014 at 3:35 pm

Not legal in Britain.

Alistair Cunningham February 12, 2014 at 3:39 pm

Indeed it is. Various auxiliary activities such as pimping may be illegal, but prostitution itself is 100% legal as long as both parties are willing and over 18.

Jan February 12, 2014 at 8:12 pm

I trust Alistair, just because he has the most British name ever.

Roy February 12, 2014 at 9:04 pm

No he needs a social climbing hyphen attached to Smythe for that.

Alistair Cunningham February 13, 2014 at 4:43 am

:-) It is a very traditionally Scottish name, though I was born Northern Ireland and spent most of my childhood there.

Rahul February 13, 2014 at 12:52 am

Off the books income? Doubt street hookers file returns.

Alistair Cunningham February 13, 2014 at 4:51 am

True, but that applies to a multitude of other businesses too.

ohwilleke February 13, 2014 at 12:54 pm

In the U.S., few street hookers have enough income to owe income taxes, and as far as FICA goes, it is a wash – they don’t pay the FICA taxes up front, but don’t get the benefit that go with those taxes on the back end.

GC February 13, 2014 at 4:11 pm

And now you should definitely see what FICA means in Italian….

David Pittelli February 12, 2014 at 3:14 pm

Why stop at prostitution? If a woman works full time and gives cash to her stay-at-home husband (or vice-versa), why is that division of labor and distribution of money not worthy of inclusion in GDP figures?

Chris Purnell February 13, 2014 at 12:26 pm

Or, grand- parents baby sitting, picking up from school, shopping etc.

Urso February 12, 2014 at 3:14 pm

We are not as poor as we thought we were

Bradley February 12, 2014 at 4:32 pm

They both clearly add value to some consumer. Think what it would add to American GDP! Our politicians typically don’t have formal mistresses – a form of “home production” of sorts – they usually buy these services (perhaps some seasonal adjustments are called for (e.g., summer interns.))

More from the American Heartland here!

Yancey Ward February 12, 2014 at 5:14 pm

Watch the Hookers and Blow industry to reach 100 billion pounds within a few years.

leftist conservative February 12, 2014 at 8:15 pm

GDP Uber Alles!
Growth Uber Alles!

We are all just cattle on CorpGovMedia’s cattle ranch.

Bender Bending Rodriguez February 12, 2014 at 11:35 pm

I’ll create my own GDP figures, with hookers and blackjack!

Andreas Baumann February 13, 2014 at 3:31 am


GC February 13, 2014 at 3:43 am

I’m curious how much the estimate will be for Italy, between the undercover economy, the Mafia, the Chinese Mafia, the Albanian Mafia…

Roadrunner February 13, 2014 at 11:26 am

I wonder how sensitive these numbers are to stimulus.

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