An Alternative View of the Underground Economy

Over the last decade or so, economists and others concerned with the analysis of economic activity have attempted to explain the decline in U.S. growth rates. The slowdown in the U.S. economy has not been confined solely to this country nor has it been solely an economic phenomena.' The other industrialized countries, and indeed, the entire world, have experienced these declines, albeit at different rates. This economic situation has produced a policy crisis with respect to public finances. With the declines in growth, tax revolts, and other "populist" outpourings, governmental sectors have been sorely pressed to discover new revenue sources. Both economists and politicians have discovered in social life a new element that is both promising and disturbing-one that it not yet a source of revenue, but certainly has such potential: the underground economy. Lying outside formal market boundaries, the set of activities known as the underground economy has been viewed negatively by economists and policy leaders since they see it as basically an avoidance of taxes. While their concern with tax avoidance is legitimate, their blanket assertion that the underground economy is predicated solely on such narrow grounds is simply that: an assertion. This article argues that there is another aspect to the underground