Does economics as a science or a technology take only the legitimate economy as its proper field of study?

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My impression as a science or a technology it takes only the legitimate economy (that is under the rule of Law) as its proper sphere.

That there is a preponderance of studies on the legitimate economy may be simply due to its greater visibility, its obvious legitimacy, the enormous mass of data associated with it.

But it seems to me that the illegitimate economy has an equal right to be called an economy. It has its own Law immanent in itself.

Are there any studies that say how these two economic substances actually interact? Where one substance flows into the other (by seeking a weak point to puncture by violence or cunning)? Then is there then only one actual economic substance?

Mozibur Ullah

Posted 2013-03-11T19:02:24.183

Reputation: 1

Question was closed 2013-03-19T03:10:44.987

I don't think that illegal economies have their "own Law immanent in itself." They follow exactly the same laws as legal economies based on scarcity, demand and supply. Economists do look at illegal economies, for example the popular work by Levitt & Dubner "Freakonomics" which looks at the economics of drug gangs. – leancz – 2013-03-12T10:02:02.520

@leancz: I mean by a 'Law immanent in itself' not economic laws, but political law - in the legitimate economy this is the Law backed by the state, in the illegitimate economy there is a corresponding Law which actors will know and act on. I have read that - I recall there advice is not to become a drug runner, it isn't worth it financially. But this doesn't explain wht figures ike the drug trade is around $400 Billion. Where do these figures come from, who supplies them? Surely not the drug lords themselves? – Mozibur Ullah – 2013-03-12T10:15:22.243

@leancz Although I initially wanted to include Freakonomics into my answer, I didn't because of this criticism.

– None – 2013-03-12T10:16:09.117

@leancz: Its not enough to come up with economic laws - do be a proper science comparisons and predictions must be made. How is this to be done in the drug trade where presumably very poor figures/statistics are available? One cannot ask for quarterly statements or monitor the trade so easily. – Mozibur Ullah – 2013-03-12T10:17:48.717

@MoziburUllah Illegal drug trade has its data "challenges". See, e.g., such section in the UN's reporting.

– None – 2013-03-12T10:23:31.823

What does this have to do with philosophy? Also, there are economic studies of MMORPGs, for goodness sake--completely imaginary economies! So how is the answer not trivially no, economics can cover any aspect of trade of goods and services between people or other entities. – Rex Kerr – 2013-03-13T14:35:43.757

@Kerr: What has MMORPGs got to do with the Real Economy? One can collect what ever information one cares to define - untrue for the Real Economy. The rules are set by the game designer. Again untrue for the Real Economy. They're toy studies. Which doesn't mean that they can't be either entertaining or edifying. But they can in no way substitute for studying the real thing. Its a bit like doing biology by studying a painting of a zebra. – Mozibur Ullah – 2013-03-13T16:14:54.157

Answers

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Please note that cunning (unless particularly duplicitous) isn't illegal, but rather an important aspect of microeconomics.

I think the Wikipedia entry on the black market is quite insightful.

Unless a black market is completely* closed off, of course it forms an inseparable part of the total economy, and, if significantly so, then can't be ignored. I should think there's plenty research (even theoretical) on the effects on the regular economy of, e.g., money laundering and smuggling.

*I can't think of examples of closed-off black markets that are not particularly unsavoury. Such markets probably wouldn't even use legal currency, but more likely rather be barter economies. And the "goods" exchanged wouldn't have substitutes in the regular market.

user3164

Posted 2013-03-11T19:02:24.183

Reputation:

I do mean cunning as in duplicitous/malicious. I don't see how a black market can ever be closed off. The wiki article is good in a qualitative sense but it doesn't describe how conventional (or unconventional) economics explain its workings. The informal part of the black market will use conventional finance rather than barter - as its raison-d'etre is to escape employment & tax legislation and not trading in illegal goods. – Mozibur Ullah – 2013-03-12T10:35:37.357

@MoziburUllah If there's no data, then there's nothing to explain. However, one might use the standard economist's toolbox, and the assumption that economics is applicable, to determine what the data would or could be. If we know nothing about a black market, then we can't make that assumption. (That is, I presume, your point.) But if we know, e.g., that it consists of contemporary humans, then we might just have enough to hypothesise the workings of such black market. – None – 2013-03-12T14:34:45.603

There's no data for strings but physicists are strongly interested in them. As is the case for dark energy and mass. I'm not saying that conventional economics is wrong but for it to be a science it must be confronted with evidence and seen whether it conforms to it. In physics progress at a fundamental level is made by looking at exceptional cases, not where it works conventionally. – Mozibur Ullah – 2013-03-12T17:50:21.670

>

  • There's data for QM and there's data for GR. The combined data is (not a proof but an indication) for ST. What has this to do with the question or my answer to it? 2) I sort-of agree with you on what makes a science. But you seem to suggest that black markets are (perhaps even in principle) unaccessible. They're not. Just participate in them. :)
  • < – None – 2013-03-12T18:06:44.683

    Any new theory is going to have be consistent with GR & QT. As is ST, Causal nets, LQG and so on. This doesn't explain the popularity of ST. But we digress. It was probably a bad example to rebut your claim if theres no data theres nothing to explain. A phenomena is there to explain, as one begins to investigate it - data is produced eventually. I wasn't saying that they must be inaccessible. But I think that is a good point. This is nothing new, look at the heisenbergs uncertainty principle. Its probably easy to participate in them at a retail level. ie at the level of the consumer – Mozibur Ullah – 2013-03-12T18:13:24.837

    But how about at the level of an institution? Companies must file certain reports by law. They also self-monitor I expect much more precisely. These would be counter-productive moves for black market actors. – Mozibur Ullah – 2013-03-12T18:15:50.387

    The problem that you see is, I believe, quite big in cultural anthropology, where the observer in the field may have an unknown influence on his subject. However, in crime, one may pretend to be either a end-customer or a producer or a seller or whatever. This is what undercover operations are for, including fancy sham organisations (perhaps you've seen the "Miami Vice" series). This is usually done by law enforcement agencies or investigative reporters, but why not by economists? I know why, but still, an economist might hook up with such an agency and retrieve hopefully untainted data. – None – 2013-03-12T18:28:37.853

    @MoziburUllah 3) Of course, "untainted" doesn't imply precise or massive. 4) In fact, the obvious existence of feedback loops between economists and their subject, is what makes economics in general (not just of black markets) interesting. 5) And it can't be ruled out (on merely scientific grounds) that physics has a similar quality. 6) Many humans tend to think that thinking like an economist helps a participant in an economy, and therefore they (try to) act like one. – None – 2013-03-12T18:57:11.500

    I think you should add the last two of your comments to your answer as I think they are quite useful. On no.5, - true but just adding that a significant difference is that feedback loops lie closer to the surface in economics/culture than in physics. – Mozibur Ullah – 2013-03-14T07:22:42.783