WITHOUT the help of an illegal moped driver, a neighbor of mine would have missed our home-bound shuttle bus at 6:10pm.

It was 6:06pm last Monday, as she emerged from the last stop on Metro Line 2 at East Xujing station in Qingpu District.

Normally, it takes around eight minutes to rush on foot to where our neighborhood shuttle bus parks. No doubt she would miss it even if she sprinted.

Luckily, there were quite a few underground moped drivers around - they bend the law to run a transport business.

She snapped her fingers and jumped on a moped. In the blink of an eye, the driver rushed her through a thick crowd to the parking lot and she found herself heaving a sigh of relief as she reached the shuttle bus doors at 6:09pm. Beaming, she paid the moped driver 5 yuan (80 US cents).

You might say 5 yuan is no small deal to cover a distance that usually takes eight minutes, but if she missed our shuttle bus, she would have to pay around 50 yuan to get home by taxi, or she would have to wait another hour for the next shuttle bus on a cold winter night.

In this sense, illegal as they are, myriad mopeds do residents a service where regular or licensed transport vehicles are either unavailable or too expensive.

System D

These mopeds belong to what journalist Robert Neuwirth calls System D - a name for the world's unregulated, underground economy. "D" stands for the French word debrouillards, meaning hard-working hustlers and entrepreneurs who disdain regulation.

In his popular 2011 book, "The Stealth of Nations: The Global Rise of the Informal Economy," Neuwirth says System D is dynamic in developed as well as developing economies.

As he discovers, the United States is home to the world's largest underground economy.

"It makes no sense to talk of development, growth, sustainability or globalization without reckoning with System D," he says, citing OECD reports that about 1.8 billion people, or half the world's workforce, made their living in System D in 2009.

As a journalist whose work has appeared in The New York Times, the Washington Post and Fortune magazine, Neuwirth doesn't offer a moral judgment on System D.

What he does is to record life as it is and to help readers - including urban regulators - better understand the informal economy (unlicensed and untaxed) and how it interacts with the formal one (licensed and taxed).

Perhaps the best part of the book lies in the author's observation that System D serves a different clientele, who would never be absorbed into the formal economy.

In my neighbor's case, she would hardly take a taxi - which belongs to the formal economy - home even if underground mopeds were literally whisked off the roads. In other words, banning the informal economy may not always benefit the formal, because in many cases they are not mutually exclusive. They often co-exist.

As Neuwirth observes, the Brazilian street market shopper isn't weighing cheap sunglasses against US$200 Oakleys, and the customer at a Nigerian street stand never even considered a US$400 Nokia phone.

Actually, a thriving informal economy can benefit the formal one, indirectly.

Pressure valve

Foremost, it creates jobs and reduces the burden of the formal economy to hire. It's a pressure valve.

As the Great Recession bites and unemployment in the formal economy in the United States has soared, more and more Americans have turned to System D for income, Neuwirth points out.

In Nebraska, for example, an entrepreneur sells home-baked cakes for US$20 apiece, generating US$500 a month in revenue, with no taxes, no license fees and no rent on a commercial kitchen. Even in New York City, pushcart operators run off-the-book businesses everywhere.

In megacities such as Sao Paulo, Brazil, and Lagos, Nigeria, the author says, System D offers many workers their only option for employment.

China owes its outsized growth in part to its willingness to do business in System D. Worldwide, System D is worth more than US$10 trillion a year.

"System D is the economy of aspiration. It is where the jobs are," says Neuwirth.

Reading Neuwirth's book has prompted me to survey what I have bought. I bought my apartment and car in the formal economy, for sure, both with taxes and invoices. But a lot of other things I have bought - from custom-made beds and tables by family workshops to designer musical instruments - come from the informal economy.

If you bother to count up your own acquisitions, you might have similar findings and realize that you actually don't care about the taxes and invoices for everything you've purchased.

Consider the education market.

Many parents want their only child to be admitted to a good high school or college, so they pay fat fees to famous high school teachers to tutor their only child outside class.

Fair enough. But tutoring money paid this way is off the books and undocumented in official statistics.

Before China's economy took off in the late 1970s, the informal economy was dubbed "the capitalist tail" that had to be cut off. That changed.

Street hawkers of shoes and clothes flourished across the country in the 1980s and 1990s and they were among the first people in China to get rich. And farmers began to sell fruit, vegetables and poultry on the streets or in pushcarts

Some of those street peddlers rented a stand and others did not. In neither case could the government easily calculate how much money the peddlers really earned.

Now, street peddlers are dwindling in number as more and more Chinese cities go "modern."

But still, in some old hutong (lanes in Beijing) or nongtang (lanes in Shanghai), peddlers of cheap pancakes and noodles -catering mainly to poor people - remain prosperous.

And, in the past eight years since I came to Shanghai, I have noticed a very old and frail man, possibly in this late 70s, offering cheap barber's service right across the street from our office building. His customers are mostly as old as he.

Miniature trees

Last week, my wife and I bought a beautiful pot of miniature wintersweet trees from a farmer couple who rent a dilapidated room to do flower business near our suburban home. The price was good, and the pot was delivered to our home for free. There was no invoice.

Does one pay tax and get an invoice for all the flowers he or she buys? If not, it shows there's a basic trust between the buyer and the off-the-grid seller.

Neuwirth could have explored why there's sometimes a solid sense of trust between the seller and the buyer in the informal economy, which mainstream economists tend to brush aside as something riddled with fraud.

There's cheating in the informal economy, of course, but cheating is not the whole story.

There's trust in the formal economy, for sure, but trust is not the whole story, either, as evidenced by food scandals and financial schemes that have befallen the world's regulated and taxed businesses.

What the book means for economists and policy makers is not that they should, from now on, hold System D in awe.

Neuwirth says: "What most politicians and economists don't see is that there's more nuance to the problem than just asserting that all System D merchants are tax cheats."