A black market is a thriving illegal marketplace where goods or services are traded without the consent of the authorities. It may be clandestine, operating outside the law, or it may be overt and strictly regulated by government decree. In either case, it represents an unregulated free market where prices are set by supply and demand rather than by government fiat.
While black markets can emerge for any good or service that is illegal or heavily regulated, they are most commonly associated with illegal drugs and weapons. Other common black market items include alcohol, tobacco, ivory, pharmaceuticals, endangered species products, counterfeit goods, human organs, and stolen property.
The black market is distinct from the gray market, which refers to the sale of legal goods or services through unauthorized channels. The gray market is not illegal, but it may operate outside the bounds of official distribution channels and thus present a lower quality product or service.
For example, a gray market might sell legitimate products that are counterfeit, damaged, or past their expiration date.
The term black market comes from the French marché noir, which literally means “black market.” This is in contrast to the marché blanc, or “white market,” which refers to the legal economy. The French phrases were adopted in English in the 19th century.
The black market is sometimes also referred to as the underground economy, the informal economy, or the shadow economy. These terms all refer to economic activity that takes place outside of government regulation and taxation.
According to some estimates, the size of the global black market is worth upwards of $2 trillion per year. This makes it larger than the economies of all but a handful of countries in the world.
While the black market is often associated with illegal activity, there are also many legal goods and services that are traded on the black market. For example, tickets to popular sporting events or concerts are often resold at a significant markup on the black market.
Black markets can emerge in any country, but they are more common in places with high levels of government regulation or where the rule of law is weak. This is because it is easier to operate outside the law when there is less risk of being caught and punished.
Some economists argue that black markets are a necessary evil, providing goods and services that would otherwise be unavailable due to government regulation. Others contend that black markets are harmful to society and should be eliminated.