Unexpectedly Intriguing!
June 25, 2014

How much does the illicit sale of heroin really contribute to the nation's GDP?

Asian Heroin - Source: http://www.justice.gov/dea/pr/multimedia-library/image-gallery/images_heroin.shtml

Proving once again that we're willing to tackle really strange questions, we thought we'd take a stab at it, following the same approach that nations like Italy, Ireland and specifically the United Kingdom have taken in seeking to inflate the reported values of their countries' Gross Domestic Product.

Because when politicians are desperate to claim more economic growth to try make themselves look good, it's time to look the other way when it comes to accounting for the economic impact of things that the politicians have outlawed to try to make themselves look good.

Of course, the problem with the things that politicians have outlawed, such as heroin, is that it can be very difficult to get accurate business statements from the people who are engaged in the outlawed trade, such as heroin dealers. For some strange reason, many of those who are engaged in such trades aren't willing to fully detail the figures related to their illicit businesses on their income tax returns or in their quarterly financial statements.

So economists in nations seeking to record a positive benefit for illegal activities have to estimate how much those illegal activities add to their GDPs. In the U.K., that meant going back to the findings of a study of heroin use in the nation in 2003, then adjusting for changes in the quality and price of heroin over time, as well as the number of heroin users.

For example, in 2003, a benchmark study found there were 36,000 heroin users in the U.K., who could buy a heroin product that was cut by dealers to be 33% "pure" heroin on average, which the United Nations reports would cost the equivalent of $100 U.S. dollars per gram. Altogether, total heroin sales in the U.K. were estimated to total some 1.349 billion GBP, or because most nations will likely have figures only in the millions, let's call that 1,349 million pounds.

Six years later, in 2009, the number of heroin users had increased to 38,000, the amount of "pure" heroin in a typical "retail" sample of heroin had increased to 43%, and the cost had fallen to the equivalent of $69 U.S. dollars per gram.

Once you know all these numbers, we can mathematically chain them together to estimate how much heroin sales "contributed" to the economy of the United Kingdom in 2009. In fact, let's do those maths now using the special-purpose ready reckoner we've built to do the job below....

Heroin-Related Data
Input Data for Benchmark Year Values
Estimate of Heroin Sales in Benchmark Year [millions in national currency units]
Number of Heroin Users in Benchmark Year
Purity of Heroin in Benchmark Year [% "Pure"]
Price of Heroin per Unit in Benchmark Year [USD/gram]
Input Data for Year of Interest Values
Number of Heroin Users in Year of Interest
Purity of Heroin in Year of Interst [% "Pure"]
Price of Heroin per Unit in Previous Year [USD/gram]

The Contribution of Heroin to the Nation's GDP
Calculated Results Values
Estimated Contribution of Heroin Sales to National GDP in Year of Interest [in millions of national currency units]

If you're reading this article on a site that republishes our RSS news feed, click here to access a working version of this tool!

You'll note that we mixed the units of currency in the tool above, mainly since the estimated cost data for heroin is easily obtainable in terms of U.S. dollars per gram. However, the nature of the math is such that international exchange rates do not need to be taken into account, and our tool's output will be presented in terms of the value of the national currency for which you entered for the estimate of the value of heroin sales for your nation of interest.

For our default data, which applies to the United Kingdom, that contribution of heroin to that nation's GDP is expressed in terms of its own currency [GBP].

In doing that math for the data we have for the year 2009, we find that the contribution of heroin sales in the U.K. totaled up to a disappointing 754 million pounds, just 55% of what heroin sales contributed to the U.K. economy six years earlier, as even though its quality and consumer base increased and its price fell, the relative quantity of heroin demanded by U.K heroin users declined.

But, for a politician looking to boast of how well the nation's economy performed under their leadership in that year, that extra 754 million GBP would be like bringing the 754 million pounds that U.K. tourists charged while on holiday in other nations in 2009 back into the home economy. Brilliant!


Labels: , , , ,

About Political Calculations



blog advertising
is good for you

Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:

ironman at politicalcalculations.com

Thanks in advance!

Recent Posts

Applications

This year, we'll be experimenting with a number of apps to bring more of a current events focus to Political Calculations - we're test driving the app(s) below!

Most Popular Posts
Quick Index

Site Data

This site is primarily powered by:

This page is powered by Blogger. Isn't yours?

Visitors since December 6, 2004:

CSS Validation

Valid CSS!

RSS Site Feed

AddThis Feed Button

JavaScript

The tools on this site are built using JavaScript. If you would like to learn more, one of the best free resources on the web is available at W3Schools.com.

Other Cool Resources

Blog Roll

Market Links
Charities We Support
Recommended Reading
Recommended Viewing
Recently Shopped

Seeking Alpha Certified

Archives
Legal Disclaimer

Materials on this website are published by Political Calculations to provide visitors with free information and insights regarding the incentives created by the laws and policies described. However, this website is not designed for the purpose of providing legal, medical or financial advice to individuals. Visitors should not rely upon information on this website as a substitute for personal legal, medical or financial advice. While we make every effort to provide accurate website information, laws can change and inaccuracies happen despite our best efforts. If you have an individual problem, you should seek advice from a licensed professional in your state, i.e., by a competent authority with specialized knowledge who can apply it to the particular circumstances of your case.