Kanika Marwaha
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Kanika Marwaha in Market and Economic Perspective,

Sex, Drugs and Toxic Gases Inflate GDP

Can you imagine how much the GDP of a nation would increase if all its illicit activities were added into the calculation? There's no need to wonder since many nations within the EU are incorporating drugs and prostitution into their GDP calculation.  

The graphic below from the Wall Street Journal and EuroStat illustrates the potential increase in GDP. Some EU nations such as France have chosen to continue calculating GDP in the traditional manner.

The question becomes as nations vie for the largest economy will they secretly encourage consuming illegal drugs and prostitution? And since criminals aren't really known for their desire to pay taxes, is it fair to (inaccurately) count these activities in GDP since they do practically nothing to alleviate the national debt?

What is the benefit of being able to state that the economy is larger than it is, if only to promote morally questionable behavior? Perhaps that's why France chose, wisely, to continue with traditional calculations of GDP.

The EU isn't the only one to make changes in its GDP calculation.  Nigeria has altered its calculation to include telecom and online sales, and as a result Nigeria is now the largest nation in Africa. 

Even the United States recently announced a change in policy to include Research and Development and Artistic Creation as a part of GDP. Additionally due to new regulation regarding carbon dioxide emissions, an additional $1.3 trillion could be added to US GDP as carbon dioxide emissions are monetized.

At the end of the day, regardless of how a nation chooses to calculate its GDP, it should be responsible enough to ensure the results are accurate, verifiable and depict an honest picture of the economy's level of productivity