When the U.S. reports its gross domestic product, the sum of all goods and services the economy produces for a particular period, it doesn't count illegal activities like prostitution and drug dealing since how would you ever get a handle on that?

South African flag.

South Africa is attempting to count how much illegal activities contribute to its gross domestic product.

As the Bureau of Economic Affairs observed in a document on how it constructs the GDP:

Some activities, such as the care of one's own children, unpaid volunteer work for charities, or illegal or black-market activities, are not included because they are difficult to accurately measure and value.

Nevertheless, the challenge of trying to estimate what illegal activity adds to the national GDP didn't deter South Africa which for the first time has estimated the contributions of the criminal activity including drug sales and abalone poaching to its overall economic output.

South African economists estimate illegality added $465 million, or less than one percent, to South Africa's 2008 GDP of $305.9 billion.

The problem is, experts believe South African government economists are underestimating how much the black market is raking in.

From Reuters:

"I think it is a bit conservative," said Freddie Mitchell, economist at research group Efficient.

"The international community sees South Africa as a haven for drugs, so I think 3.5 (billion rand) is a bit of an underestimation."

 

And as another expert notes, the data are so slippery as to be little more than best guesses.

"It's difficult enough to estimate normal GDP before delving into the dark world of organised crime and illicit activities," said Russell Lamberti, an economist at market analysts ETM.

"We appreciate what they are trying to do but we need ... to treat the figures with caution," he said.

Also, what about the costs of illegal activity? While prostitution arguably adds to the GDP, crime reduces the GDP as well. Murders mean, among the tragedies involved, lost work hours. And prostitution means HIV and AIDS with all their attendant costs.

Of course, someone could argue, and rightly, that the way GDP is usually calculated in the U.S. and elsewhere doesn't typically factor in the costs associated with certain activities either, like the environmental degradation that comes from some energy production activities, for instance.