Black Markets

The black market is a complex and multifaceted phenomenon known and discussed under many different names: the informal, unofficial, irregular, parallel, second, underground, subterranean, hidden, invisible, unrecorded, and shadow economy. Its underlying feature is a set of activities that evade the regulatory and administrative standards of the formal or official economy, are not reported to the government, are unrecorded by the system of national income accounting, avoid the taxation system, and, in some cases, involve straightforward criminal products and services. The black market economy, when trading decisions are not the result of coercion, is a free market because, by definition, it lacks government intervention.

Libertarians interpret the emergence of the black market sector in two coextensive ways. First, they view this sector as a natural outcome ...