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."

I strongly suggest reading the book “The misfit economy “ by Alexa clay and Kyra maya Philips.
It discusses the economics of various illegal groups, such as Somali pirates, and the lessons they teach on how normal economics work.

David Trammel's picture

I think the underground / barter economy is going to play a much bigger role in our lives in the Future. And perhaps sooner than we think.

My father is a small-town lawyer and when I was growing up he used to exchange legal services for things like eye doctor appointments, guns, furniture--once he even got a motorcycle (that he resold). Just recently he did estate planning for someone in exchange for piglets! Of course, he still needs money for most things, but it shows how some professional skills can still be leveraged in a barter economy.

Blueberry's picture

So which one would you choose for the new money?

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