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he underground economy refers to economic transactions that are deemed illegal, either because the goods or services traded are unlawful in nature, or because transactions fail to comply with governmental reporting requirements. Also called the shadow economy, the black market, or the informal economy, the underground economy in the United States is comprised mainly of the sale of street drugs and illegal prostitution. However, other examples of the shadow economy exist as well.
Understanding the Underground Economy
It is difficult to accurately gauge the size of underground economies because, by nature, they're not subject to governmental oversight. Therefore, the economic activity does not generate tax returns or appear in official statistical reports. However, tracking outgoing expenditures, even though the transactions are cloaked, can give a sense of statistics. In other words, the money spent—that's not accounted for in recorded transactions—theoretically represents the breadth of black market activity.
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