No, Big Data firm, the UK isn't teeming with UBER-FRISKY GIGOLOS

Prostitution + official GDP figures = buckets of FAIL

Gordo: EPIC FAIL

Worstall @ the Weekend You may or may not have seen that the government has decided that GDP, the measurement of the size of the economy, should now include the activity surrounding drugs and prostitution. We can now assuage our guilt at that quick shag and a toke on the way home with the thought that we are, in fact, making the country richer as we do so.

It's also nice to see an increase in the size of the economy that comes from entirely sustainable activities: we're not likely to run out of the resources essential to either activity in anything that resembles a human timescale.

The reason why the change was made was the usual bureaucratic convenience of Brussels. They would like the way that we measure the various European societies and economies to be the same. Partly this is simply because they're bureaucrats and tidy minds like theirs abhor differences. Yet there is also a more reasonable motive: the law on what is allowable and what is not varies in different countries.

If we want to measure what's actually going on, we'd prefer it if we actually did measure what's going on, not the different legal status it might have in the different places.

For example, selling sex is legal in Sweden but buying it is not, selling sex in the UK is legal but brothels, soliciting and pimping are not, while any and every version of commerce in sex between consenting adults is legal in Germany. Retail dope isn't quite legal in Portugal but it is decriminalised: it's still criminal in England even if certain areas don't enforce it very much.

If you were a statistician trying to work out what's going on you'd prefer that all of these differences were ignored: so that's what they did. Economic activity that is entirely consensual, even if illegal, should now be counted as part of GDP. Drugs thus added £7bn or so to our GDP last year, a bit more than hairdressing, while prostitution was apparently worth a smidge under £6bn.

Recall what it is that GDP is trying to measure: the amount of value that is added in the economy. We can do this by looking at all of the production, all of the consumption or all of the incomes in the country. If people didn't lie on their tax returns all would be equal as methods of measurement – but they do, so they aren't: the income measure is, remarkably, always lower than the other two.

Yet our figures show that there's around 60,000 female prostitutes in the country: 0.1 per cent of the population are, in the modern phrase, “sex workers” and 0.2 per cent of the working population are working girls (but, oddly, not working boys – read on). We probably should be recording their incomes in the overall GDP figures, especially as their activities are, indeed, legal.

On the other hand, we do have a certain problem running the other way: it depends upon what we're trying to use GDP to tell us. Some have hinted that the EU wants these changes as it makes the economies look larger and thus the debt burdens that they carry look smaller in comparison. At which point we probably do want to have tarts included in the economy but probably not drugs. (HMRC does have a unit or two that collects the cards from phone boxes, monitors the escort sites, makes a booking and then asks for a tax return on arrival. You've got to be pretty high up the organisation's shit list to be assigned to it, though.)

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