Understanding The Underground Economy

David Trammel's picture

Its a long read but this article has a insightful look at the way prison economies (and other underground economies) come into being, evolve and adapt.

From pecan pralines to ‘dots’ as currency: how the prison economy works. - When economic freedoms are taken away, informal markets will always find new and ingenious ways to satisfy demand.

It also points out how the "War On Cash", the attempt by governments and business to do away with physical money and force commerce onto digital records, if doomed to fail.
"For those concerned about the future, the hidden economies of the Louisiana prison system offer a vital lesson. It stems from the power of the informal economy in enabling a society to recover from a shock, and the extraordinary levels of effort and innovation that people will use to establish a trading system if theirs is damaged or destroyed.

Louisiana’s prisons have parallel economies. There is the illicit drug economy that runs on its untraceable dot currency, and alongside it a more innocent marketplace where basic necessities are mediated with some agreed item – currently coffee – acting as a currency. Trades in both economies work because of the most basic law of prison economics – that a prison is a place defined by unsatisfied needs, tastes and demands. Both economies are self-built, organic and highly innovative. Both show that a currency, the provision of which can seem like the ultimate role of the state in an economy, can be established completely informally. Prisons show that the human urge to trade and exchange is impossible to repress, and that solutions to future challenges are as likely to come from informal markets as formal ones."