Legalization Stimulus

Here’s one idea:

Of course there are many illegal markets that would generate stimulus were they to be legalized. Here are some of the big ones.

1. Drugs
2. Guns
3. Prostitution (except in Nevada)
4. Gay prostitution (even in Nevada)
5. Gambling
6. Trade with Cuba
7. Liberalized immigration

I’ve heard a lot of that kid of thing lately, but though I’d be a supporter of several of the items suggested on the list, I’m a bit skeptical of the theory. These all sounds to me like things that would do more to raise the potential output of the economy than to raise the actual output of an economy that’s producing far less than capacity right now.

This is probably clearest with immigration. When the economy is growing and labor markets are tight, lots of immigrants want to come here and keeping them out carries a real economic price. But right now there’s extremely little hiring and plenty of jobless people to choose from. Letting more people come would have some effect, I suppose, but it’s hard to see it being a dramatic one. With regard to things like drugs and prostitution, bringing some transactions that are already happening into the above-ground economy would certainly boost our GDP measurements. But these are transactions that are already happening. Shifting them from the illicit to the licit economy doesn’t actually change the fact that there are already people in America earning a living as prostitutes or pimps or drug dealers.