Recent decisions will affect future of nation
Our nation is reckoning with two recent major decisions made by the government. The first is the reversal of Roe v. Wade by the U.S. Supreme Court, and the other is the Congress's passage of a gun control bill.
These are both significant laws which will affect our nation for a long time to come. As with any court decision or legislation, there are those in favor and those who are not. My purpose here is to simply provide some economic analysis of such legislation. Just the factual, economic implications.
There is economics involved in such court decisions or legislation, you ask? Yes! My comments will focus on the underground economy, otherwise known as the black market, informal sector, hidden economy, illegal economy, shadow economy and by many other names.
By definition, an underground economy arises when there are regulatory rigidities — when anything is considered illegal or requirements are burdensome to meet. However, not all underground activities are illegal. When people are told they cannot do something or when it is too difficult to obtain the necessary permission to do something, an underground market arises. Its result is a shortage of the desired product or service, which automatically escalates its price, as people are willing to pay more for a product in short supply by purchasing it from any available source “around the corner.” What if they cannot afford it? Then they may turn to other means.
I know when we hear the concept of an underground market, many of us think of illegal drugs, alcohol during Prohibition, the selling of kidneys, etc. But it goes well beyond that. The underground market applies to lots of goods and in many instances operates parallel to the legal market. It applies to cases where goods are not sold in the formal market or individuals are not working in the formal market, so taxes are not paid by individuals or collected by the government. Here are a few examples: workers being smuggled across the border to work in the U.S., ticket scalpers at a baseball game, counterfeit goods, people working informally, or less serious activities such as the kid across the street mowing your lawn and being paid in cash, your garage sale, your child’s lemonade stand, hoarding toilet paper and reselling it at a higher price, bootleg music downloads, and much more that may seem innocuous at first but are still underground.
If you pay for anything under the table, you are in that market. The size of the underground economy is conservatively estimated to be $1 to $2 trillion, about 5% to 10% of the U.S. economy. In many developing nations, it is much higher, as that is the only way for many poor people to survive.
The overturning of Roe v. Wade, which makes abortion illegal, will invariably create more of an underground market for abortions as people travel across state lines and women undergo various procedures which could endanger their lives. For those who cannot afford it, they will find other means, if necessary. The restriction on firearm sales will create more of an underground market for these weapons, as those who really want access to these weapons will have others buy it for them or they will find some other way of getting them.
As I said in the beginning, my purpose here is to simply provide the facts, not to make any value judgements as to what is good or bad. There are pros and cons to every legislation or decision and these are just the facts. The battles will continue to rage, and our nation still has a long way to go.
Kojo Quartey is president of Monroe County Community College and an economist. He may be reached at kquartey@monroeccc.edu.
This article originally appeared on The Monroe News: Kojo Quartey: Recent decisions will affect future of nation
