Sudhir Alladi Venkatesh has a fascinating article about the "off the books economy" in the Boston Globe. Ventakesh is the American urban poverty researcher whose work I first encountered in Freakonomics, and the article is adapted from his own new book, Off the Books: The Underground Economy of the Urban Poor, which I've just ordered.
How big is the underground economy? The General Accounting Office and the Internal Revenue Service produce estimates every few years that differ widely, but one government study calculated that $500 billion in income fails to be reported each year. Another estimate, based on consumer behavior, suggests that 4 out of 5 Americans turn to the unregulated world for goods and serviceswhich would raise the $500 billion figure appreciably.
But the underground economy is more than just a set of cash transactions. Cash, as it turns out, isn't necessarily the preferred medium of exchange: on Chicago's South Side, barter is just as common. I interviewed the owner of an auto body shop who threw out his cash register because customers were paying their bills in kind. They offered him cellphones, microwaves, furniture, and IOUs. He, in turn, started selling these goods from the back of the store, and now auto repair constitutes only a fraction of his income.
(Thanks, Keith!)
