Hookers and Blow. No, Really.

[Virgil Showlion]

I thought the madness was just confined to Italy, but the UK Office of National Statistics has also decided to embrace the crazy--and no doubt other nations will follow suit.

As a preamble: This started in the middle of last year when the US Treasury Department decided to arbitrarily change the way they calculated and reported GDP. They knew how the rest of the world calculated GDP, but the US numbers weren't looking so hot and they needed to pull a rabbit out of hat. Hence they changed the weighting of various components, included certain intangibles that had never previously been included, and presto!, achieved a 5% increase in GDP and a roughly similar decrease in the debt-to-GDP ratio.

Various nations saw this and immediately asked themselves, If the US can do it, why not us? And why not them? So they did. Brazil, China, India, and who knows how many other nations started arbitrarily adjusting their GDP calcs to yield more favourable numbers.

A few weeks ago the problem reached a whole new level of absurdity when Italy--among the sickest of the "sick men of Europe" and subjected to deficit caps as a function of GDP by their benefactors in the Eurozone--decided to include illegal drugs and prostitution as part of their GDP. As in: hookers and blow.

I just rolled my eyes at the time, thinking "well, it is Italy" (the Italian government isn't exactly renowned for its sound fiscal policy), but as I alluded to above, the UK has decided to do the same thing:

First it was Italy which, as we reported last week, had decided to "boost" its GDP by adding the estimated impact of cocaine and hookers. And now, riding on the coattails of this economics gimmick designed solely to make the economy appear more solvent, it is Britain's turn, whose Office for National Statistics will also add add up the "contribution" made by prostitutes and drug dealers.

According to the Guardian "for the first time official statisticians are measuring the value to the UK economy of sex work and drug dealing – and they have discovered these unsavoury hidden-economy trades make roughly the same contribution as farming – and only slightly less than book and newspaper publishers added together."

The article goes on the quantify the magnitude of the contribution.

Really, you can't make this stuff up.

And who knows, since the US Q1 2014 GDP print is now revised down to -1.0% and the US is one quarter away from officially re-entering a recession, the US Treasury Department may well decide that cocaine, meth, and prostitutes deserve a place in the US's official GDP too.

[billisonboard]

May 30, 2014 8:13:36 GMT -5 Virgil Showlion said:

..., the US Treasury Department may well decide that cocaine, meth, and prostitutes deserve a place in the US's official GDP too.

Don't they?

[rockon]

  No kidding! I started a thread about this some time ago but most thought my concern was petty politics. I still believe this is a real scam since many comparisons are based against GDP. A president could decide to borrow 8 trillion dollars from a foreign country, spend it on anything that now gets counted as GDP and then claim to have not increased debt relative to GDP at all... Oh wait that just happened.
   This is the classic situation where if the results aren't good, just change how they are calculated.

[djAdvocate]

they should legalize drugs and make it official.

[justme]

It doesn't make real sense to add illegal, under the table activity to GDP. Either don't include it or make it legal so you can actually track how much $$$ it is instead of pulling a number out of your ass. 

[Virgil Showlion]

May 30, 2014 16:15:33 GMT -5 justme said:

It doesn't make real sense to add illegal, under the table activity to GDP. Either don't include it or make it legal so you can actually track how much $$$ it is instead of pulling a number out of your ass. 

This way they'll eventually get to add in the value of contract killings, dog fights, human trafficking, etc.  Forcing something to be legal to make it count is... messy.

[billisonboard]

May 30, 2014 16:15:33 GMT -5 justme said:

... pulling a number out of your ass. 

Well ....

nah

[ՏՇԾԵԵʅՏɧ_LԹՏՏʅҼ]

You didn't know the House of the Rising Sun was a Bawdy House or "Den of Iniquity"? It's pretty much implied in the lyrics.