https://no01.substack.com/p/a-treatise-on-imaginary-numbers-part
Real cocaine. Real hookers. Imaginary growth.
No1
May 27, 2026

For anyone wondering where’s part 1?

https://no01.substack.com/p/a-treatise-on-imaginary-numbers

In May 2014, Matteo Renzi, Prime Minister of Italy and professional optimist, had a small problem.

He had solemnly promised Brussels that Italy’s deficit would shrink to a respectable 2.6% of GDP.

Italy, in the meantime, was in its fourth recession since breakfast and the economy was roughly the same size it had been when people still thought The Matrix was deep.

Actual spending cuts were… well… “politically challenging”.

So the national statistics office, ISTAT, stepped forward and announced: Hear ye! Hear ye! Come September, the GDP shall henceforth include the honest revenues of coke, hookers and smugglers. (word-for-word. pinky-promise)

A free 1% boost.

The criminals didn’t even have to fill out their tax sheets. They were just there, minding their own business, probably wondering why the police kept arresting them while Eurostat was busy promoting.

In the end, Renzi got his Maastricht-compliant number, Brussels nodded approvingly, and the press releases carefully avoided mentioning it.

It was all terribly harmonious.

Brussels, in its infinite bureaucratic mercy, had decided via the European System of National Accounts 2010 (ESA 2010) that every member state should do the same. The official rationale was harmonisation. Fair enough on paper.

The fact that the same change conveniently improved deficit-to-GDP ratios at once was, I am sure, entirely coincidental.

The methodology, dear reader, is where the real fun begins.

The rules were clear: only “voluntary transactions between consenting adults”.

So forced prostitution was excluded, same as trafficking victims. Even Eurostat has some standards.

Exactly how a desk jockey in Luxembourg was supposed to distinguish between the two categories from aggregated spreadsheets remains one of the great unsolved mysteries, right up there with “where do all the odd socks go?” and “What number of ants ran over No1’s desk today?”

France, ever practical, decided that all street prostitution was probably coerced and therefore didn’t count. A bold policy decision masquerading as statistical rigour. Their women’s rights minister, Najat Vallaud-Belkacem, expressed “astonishment” that her own government was doing this.

She did what European politicians do best and wrote a stern letter to the European Commission. The Commission, which had invented the rule, was suitably astonished in return. It was a beautiful display of performative theatre. The audience clapped politely and went back to pretending the numbers meant something.

The UK’s Office for National Statistics took police seizure data, multiplied by street prices, added a generous “under-seizure” multiplier, and -voilà- £4.4 billion. For prostitution they dusted off a 2004 London survey, assumed 60,879 sex workers nationwide (a figure with all the robustness of a wet paper towel), 25 clients a week each at £67.16 a pop, and reached £5.3 billion. Their own report called the assumption “weak”. (That’s bureaucrat-speak for: “we made it up, but politely”)

Spain was refreshingly honest. A senior police source told a journalist they basically guessed: five clients a day at €40, not seven days a week, maybe only half working at any time… “In reality it’s impossible to calculate. You might as well pick a number”.

And pick a number they did. That number then went into the national accounts and was used to judge whether Spain was being fiscally responsible.

Belgium, bless its committed little heart, went full method actor.

Researchers counted window prostitutes, timed customer turnover, scraped prices from review websites where clients leave star ratings like particularly sordid TripAdvisors, and fed it all into the National Bank. The ECB’s reference list now solemnly cites academic papers on “A direct measure of output in prostitution in Belgium.”

The universe runs on narrative, and sometimes the narrative requires spreadsheets about sex windows.

In 2024 Belgium quietly doubled its drug consumption estimate. The drugs hadn’t doubled. The methodology had “improved.” GDP went up because someone decided that the old guess was too modest.

This happens in legitimate sectors too, of course. But those pass the sniff test more easily.

Meanwhile, in the good ol’ US of A, the tireless lecturer on fiscal probity, looked at the UN recommendations, ran the numbers (illegal drugs would add over $100 billion), published the working papers, and then said: “Nah. We’re good.”

The largest drug market on Earth remains statistically virtuous.

Mexico, which grows and ships most of it, also declines to book the revenue. The drugs exist in glorious limbo. Real enough to kill for, not real enough for GDP.

Canada took the opposite approach: when cannabis was legalised, the same plant suddenly became GDP-eligible. The transaction hadn’t changed. Only the permission slip from the state. Schrödinger’s weed: illegal until observed by a tax collector. (I think we live in a quantum superposition… How often that I have to think about Schrödinger these days!)

Nigeria, in 2025, simply said “hold my beer”.

They rebased GDP, added illegal drugs and prostitution, and boom - nominal GDP jumped 34%.

The head of the Nigeria Economic Summit Group openly celebrated that this sort of thing lowers debt-to-GDP ratios. Investors do love transparency... and better ratios I guess.

At least the imaginary cocaine is pegged, however loosely, to something resembling a market price. Someone actually paid real money for the real product. Compare that to the largest unquestioned chunk of GDP: government spending.

The state buys an aircraft carrier the way you or I buy coffee, except nobody can walk away, there’s only one seller, and the price is whatever the contractor and the committee agreed on after sufficient lobbying.

Output is then valued at cost. Pay more bureaucrats, output rises. Hire ten more, output rises again. The government sector, by elegant statistical construction, can never have a bad year. It is the only part of the economy immune to the concept of waste.

Spend more → produce more.

Now add a $1.8 trillion deficit (nearly three times the year’s real growth) and watch borrowed money flow straight into the GDP figure. The economy is borrowing from its future self and booking the loan as present success. It’s like maxing out your credit card and then celebrating your increased “purchasing power.”

Strip out the government thumb on the scales and private output per person is… well, it’s not exactly sprinting. But the headline number keeps rising, so everything must be fine.

I went looking at what that spending actually buys us earlier. Turns out the interest alone now runs bigger than the military. But that’s a different kind of fiction:
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No1
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25 May
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So what is GDP in 2026?

It is a majestic tapestry woven from: police seizure data, decade-old sex worker surveys, review websites, customs guesses, imputed rents, worsening survey response rates, and government output valued at whatever the government felt like spending. The illegal bit is, in many ways, no more fictional than the legal bit. It is simply more honest about being fictional.

Simon Kuznets, who invented the damn thing, explicitly didn’t want illegal activity included because he feared it would legitimise it.

The EU included it anyway because the deficit ratios needed a little pick-me-up.