Down the Rabbit Hole

by Martin Harris 

Martin Harris

In the pre-Lewis Carroll years a rabbit hole was just a rabbit hole, subterranean do-it-yourself housing excavated by members of the O. Cuniculus species, but he gave it new meaning in his account of Alice’s Adventures in Wonderland. From 1865 until the 1960’s, it was a shorthand label for a fantasy world with characters designed to call attention to the strange behaviors of Victorian English courts and royalty, but then it became code for drug-induced “trips”. After that it was taken up by researchers in physics seeking the true realities inside the atom. It hasn’t yet been identified with the Underground Economy, but that will be corrected here. There’s a lot of contemporary UE interest these days, something which always happens when “normal” above-ground economics don’t seem to be working well. Typical example: States with shrunken tax receipts and enlarged deficits now show the same level of enthusiasm for finding and taxing UE inhabitants as their Golden Dome folks did the last time (and every time) they managed and governed the above-ground system into fiscal distress.

There are almost 7 million Web “hits” discussing the Underground Economy, and one of the more enlightening ones was written 11 years ago by St. Albans researcher Shanna Ratner under contract to the Tennessee Valley Authority’s Rural Studies Program. Probably her most interesting assertion comes on page 10, where she concludes a sequential argument that “the informal economy” and “self-provisioning” (note the favorable re-labeling) are ‘good things’ (a little Martha Stewart lingo there) and more pervasive than we realize, although not easily measurable (duh) and a key ingredient to a rewarding (in all senses of the word) standard-of-living, and “…that high-income households are those most likely to engage in self-provisioning.” Who knew? She explains: “High-income households tend to own their own homes and thus engage in a wide range of DIY (do-it-yourself) house maintenance and improvement measures…” while “…poorer households face a constant contradiction between the rationality of self-improvement and a structurally limited capacity to make use of it.” Amateur economist translation: those without a front lawn or back yard can’t grow veggies or repair vehicles.

Such DIY activities annoy the Progressive we’re-smarter-than-you “better sort” of folks mightily, starting with the loss of revenue to government which happens when lesser folk grow their own food, build their own structures, or maintain their own equipment. Normally taxable events, exchanges of goods and services in the above-ground economy, happen unseen and untaxed down the Rabbit Hole. That explains both the Gentry-Left enthusiasm for “smart-growth”, where lawns are, by planning and zoning decree, too small for either veggie-growing or auto repair, and the Gentry-Left disdain for large-lot suburbia (“sprawl’ is the favored pejorative) in general and Vermont’s experiment with 10-acre lots in particular, starting in the ‘70’s as a corollary of Act 250, but not a part of it (“spaghetti lots” was the favored pejorative) not just because the Beautiful People don’t want to compete with the hoi polloi in the economic arena of rural land purchase, or, worse, live near them, but because, as folks who typically make their own livings within or connected to government, they hate to see an opportunity-to-tax missed: it’s their paycheck at stake.

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It’s a logical historical note that one of the first DIY manuals for “self-provisioning” was published in the depths of the Great Depression (that would be 1935, high school history students) as “Five Acres and Independence” by Maurice Kains, with multiple re-prints and imitations ever since, some even sold by the US Government Printing Office. It was preceded in 1864 by Edmund Morris’ “Ten Acres Enough” for a new unhappy-urbanite readership and a century later came the height of the ‘hippie’ back-to-the-land movement, seeking both the above-ground (and not) aspects of the no-taxable-event Underground Economy. Vermont’s present-day self-labeled Socialist Senator was one of those refugee urbanites, escaping from Brooklyn, NYC, to land (pun intended) in the Northeast Kingdom, where he discovered that the growing season was too short, and the growing skills of the locals too widespread, for him to achieve “independence” by selling them green beans, so he migrated to Vermont’s Left Coast (Burlington) and an ultimately highly-profitable career in national politics, where he now, like most Left-leaning politicians, demands unearthing of the Underground Economy, including (of course) farmers’ markets, so that transactions there can be regulated and taxed. Just so for Vermont’s periodic efforts to license and regulate house-builders, auto mechanics, hair-dressers, and baby-sitters, as well as occasional efforts to find-and-tax non-ag businesses “illegally” operating in dairy barns made vacant when the cows were sold. And just so for periodic instructions from Congress to the IRS to tax all commercial farmers for the “imputed value” of the household food they grow and the house they occupy, but –you can do the political calculus here, with a voting population that’s 98% non-farm and 2% farm– no moves to tax home-owners on the “imputed value” of either their roofs or their rutabaga’s .

The logic of her higher-income/more-self-provisioning argument is obvious; less clear is her subsequent argument that “at the micro level, a household’s relationship to the formal economy shapes their potential and actual involvement in the informal economy.” Her example: you need a formally-manufactured chain-saw to cut and buck firewood for ‘informal’ sale. She cites a rural Vermont Nelson and Smith 1999 study: “..these so-called informal activities rely on the products of the formal economy”. True, but one can easily buy a chain-saw in either economy (in one, via un-taxed barter or swap) and then use it to create value in either economy. No predictable relationship there, just as there’s no way of telling which lavishly-equipped home-shop homeowners actually use their toys for DIY or informal-economy purposes.Nothing new in all this. A Bureau of Labor Statistics study shows that urban households in 1901, national average, Massachusetts, and NYC, all spent more than they formally earned. The MA numbers were $685 earned, $880 spent. And the 28.5% over-run wasn’t carried on a credit card; it was earned down the Rabbit Hole.