How Britain Calculates Its Hooker “GDP Boost”: 60,879 Prostitutes x 25 Clients Per Week x £67.16 Per Visit

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.”

How big of a “contribution” by hookers and coke are we talking?

Illegal drugs and prostitution boosted the economy by £9.7bn – equal to 0.7% of gross domestic product – in 2009, according to the ONS’s first official estimate.

A breakdown of the data shows sex work generated £5.3bn for the economy that year, with another £4.4bn lift from a combination of cannabis, heroin, powder cocaine, crack cocaine, ecstasy and amphetamines.

That’s right: there is now an excel model to calculate what the hypothetical GDP boost to a nation is. Making things even more surreal, and confirming the GDP calculation is officially a statistical joke, here is how drugs are accounted for:

The statisticians reckon there were 2.2 million cannabis users in the UK in 2009, toking their way through weed worth more than £1.2bn. They calculate that half of that was home-grown – costing £154m in heat, light and “raw materials” to produce.

What is clear is that quite soon the largest marginal provider of “growth” not just in Britain but all of Europe will be otherwise illegal activities:

The more inclusive approach brings the ONS into line with European Union rules, and will eventually allow comparisons of the size of the shadow economy in different member states. Joe Grice, chief economic adviser at the ONS, said: “As economies develop and evolve, so do the statistics we use to measure them. These improvements are going on across the world and we are working with our partners in Europe and the wider world on the same agenda. “Here in the UK these reforms will help ONS to continue delivering the best possible economic statistics to inform key decisions in government and business.”

Others are already spinning the justification:

Alan Clarke, a UK economist at Scotiabank, said that although the government would not feel the benefit of illegal work in terms of income tax take, there would be a spending boost. “A drug dealer or prostitute won’t necessarily pay tax on that £10bn, but the government will get tax receipts when they spend their income on a pimped up car or bling phone.

Others are openly scratching their head at the New Hooker and Blow Normal:

Steve Pudney, professor of economics at the University of Essex, said he was sceptical about the methods used by the ONS to estimate the size of the drugs market. “In my view, the ONS estimate of the size of the drug market is unlikely to be very accurate. It rests on some heroically large assumptions which would be difficult to test, and it also uses a measure of demand that is likely to understate systematically the true scale of drug use.” He added: “They are using a demand-side approach which loosely involves multiplying a survey estimate of the number of drug users by another estimate of the amount consumed by the average user. “Average retail prices of drugs come from other sources – mainly police/customs/security service intelligence sources – and, multiplying this by the estimated demand, gives the size of the market in cash terms.”

What Steve doesn’t seem to get is that at this point all GDP numbers are about as made up as can be, and are merely fabricated on the spot to justify the prevailing economical narrative. Case in point: the history of Q1 2008 GDP revisions over time, as we showed earlier:

Full article: How Britain Calculates Its Hooker “GDP Boost”: 60,879 Prostitutes x 25 Clients Per Week x £67.16 Per Visit (Zero Hedge)

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