PPP isn’t a good measure for population’s wealth or quality of life especially for developed economies either.
The economy of the US is still twice that of the EU and its global purchasing power has also pretty much doubled.
Still, if PPP GDP increases, with all else being equal (eg. stable population) it would imply the standard of living is increasing.
That is why PPP GDP captures a more accurate measure of the real world.
Said another way, what truly matters isn't "GDP growth", but changes in purchasing power/quality of life.
It has zero account for quality or outcomes.
It doesn’t care if you have access to healthy foods, it just cares how much would X calories costs, it doesn’t care what is the quality of the housing stock or the outcomes of your healthcare system.
You can very much have a situation where your economy shrinks, the quality of life tanks and your GDP PPP stays the same or grows, communism is rather good example of just how a situation can be where things are on paper very cheap from food to infrastructure mega projects and where housing is free but no one would claim that life in 1970’s Soviet Union was particularly great.
In 1990 the USSR had the 2nd highest GDP PPP in the world, if you honestly think that it was a good place to live I’ll build you a time machine myself.
That still isn’t the point, the quality of life in the USSR wasn’t a close 2nd to the US in fact when the USSR economy started to fall apart in the late 70’s and 80’s it too switched to PPP because hey our bread is cheap even if you need to stand in line to get it.
And Guyana today isn’t a better place to live in than France or Canada, and Bulgaria is definitely a 1000 times better place to live in than Russia.
There's a YouTube channel where an interviewer talks to people in various Russian cities today about the war and other topics. Loads of middle-aged and older women and men (esp. women it seems) say they want the Soviet Union back.
Your family was one of the malcontents that left. The people still there really do miss the authoritarian Soviet Union and want it back, and they fully support any warmongering necessary to achieve that goal.
Because they have no marketable skills in the current economy. During soviet times they were basically state parasites, paid to sit around and do nothing, or pretend to work in some unproductive factory, and got free housing from the state without worrying about paying for electricity or heating as the state took care fo that too.
Now that they actually need to work to support themselves they find out capitalism works for those with actual productive skills not for those who are good at pretending to work or used to work as informants to the secret police for a living.
The sudden switch from communism to capitalism without a proper long term plan to reintegrate those people into the workforce really shocked them.
Your problem isn’t with PPP but with the Soviet societal tendency to falsify reports on absolutely every level and with the inherent incomparability between planned and market economies.
In USA, GDP includes the explosion of numbers of hospital admin staffers, energy prices doubled, and production of munitions which are given to Europe. That GDP does not increase my quality of life.
I agree. As I said in my first post: "prices of goods [eg. healthcare] are inflated in the US compared to similar goods in the EU". So concretely, if healthcare prices increase in the US, but remain constant in the EU, this would increase the PPP GDP of the EU.
What I meant to write is: if the PPP GDP increases in the EU faster than in the US, with all else being equal (eg. stable population) it would imply the standard of living is increasing faster in the EU than in the US.
> What I meant to write is: if the PPP GDP increases in the EU faster than in the US, with all else being equal (eg. stable population) it would imply the standard of living is increasing faster in the EU than in the US.
No it doesn’t mean anything of the sort in fact high nominal GDP to GDP PPP ratio usually indicates a low standard of living and a developing economy the Eurozone is an anomaly in this regard mainly due to its developed infrastructure and social institutions.
And don’t forget that your GDP PPP can be twice that another county whilst your median income is can be 10 times lower.
Median income per capita adjusted for PPP would be a better albeit an imperfect measurement of it since the standard of living is dependent on so many other things.
In which case there are only 4 countries which have higher median income PPP than the US, UAE, Luxembourg, Switzerland and Norway.
AIC/household final consumption expenditure is another good indicator for standard of living and wealth in which case the US is #1.
For a tiny banking nation or petrostate to be rich is unsurprising.
But when it's half a continent, the world really ought to take out their notebooks and go into full copycat mode - at least as far as economic policy and attitudes are concerned.
> As luck would have it, the US achieved that right after conquering Iraq
Yes? A whole of of things happened back. I’m really not sure what are you implying here? Did they secretly ship Iraqi oil to the US and pretend it was extracted there?
> What petrostate should we liberate to becone self-sufficient
Uhm.. Libya? Or did everyone already forget that?
Yes, of oil and gas, and they're not producing as much as they could, for environmental reasons. They're holding off on production.
> And I think they're quite environmentally conscious.
They are, they could produce more.
Similar story for the UK and the Netherlands with North Sea gas.
> Also isn't Germany burning coal at record rates right now?
Not record rates, standard rates and declining very slowly (2023 is actually better than 2022, shown here):
https://en.wikipedia.org/wiki/Electricity_sector_in_Germany#...
They did mess up the transition with the early decommissioning of nuclear power plants, corruption is probably to blame.
That being said, the policy of austerity implemented during the Euro crisis was pretty catastrophic and arrested growth prospects for a whole generation.
It was an austerity policy in name only given government debts have only continued to increase since then. There's a demonstrated correlation between high government debt and lower growth.
Folks, please leave your notebook in your bag and search elsewhere for a role model.
There’s plenty that’s wrong with America, but there’s no other country within the same order of magnitude of scale (or, hell, expand that to either a population of 50+ million or an order of magnitude greater, even) that has long term prospects as promising as the United States.
China’s on the verge of demographic collapse. Europe, as much as I love to visit and would probably enjoy living there, is more or less the definition of sclerotic. Every other country that excels at both human and economic development is too small to move the needle. Yet the United States remains, overall, a pretty darn good place to live and a magnet for talent and capital all over the world (to say nothing of its own beyond-bountiful resources).
Just off the top of my head, I guess my short list would look something like this. I grant some, maybe all, of these have drawbacks, but these are the factors that I personally value and what I would miss by moving to any of the other places I’ve visited or of which I’m aware that seem like delightful places to live. 1. The sheer number of incredibly unique large cities (and the correlating lack of a single city that dominates national culture)
2. The ethos of individualism
3. The national park system
4. The sheer amount of diversity (racial, ethnic, national origin, religious, regional, etc.)
5. My personal access to, and quality of, healthcare (I grant that this is highly, highly subjective)
6. Other Americans (believe it or not lol)
7. Higher educational system
8. Economic dynamism and opportunity
9. Our foundational documents and subsequent amendments/improvements thereto
10. Our national tendency to do the right thing (after, of course, exhausting all other courses of action)
11. Approximately 10 trillion different regional cuisines (have you seen the number of strongly held opinions about different ways to smoke and serve meat?)
12. Every type of natural beauty imaginable
Not saying we have a monopoly on any of these! But I like where I live and think it’s a pretty cool place.
Unless you have studies to back this up, I'd drop the waiting time argument.
Anecdotally I have to await much longer than my colleagues in the US (same field, same company) to see a specialist (months vs weeks). Also, the my public insurance doesn't cover my physiotherapy for my back pain, while the insurance my US colleagues get through their employer does.
>Unless you have studies to back this up, I'd drop the waiting time argument.
Maybe you should drop it until you can provide any kind of argument or evidence, because you wrote some words but said nothing of value.
Neither have you.
My anecdotes contradict yours.
I'll just drop this since I've seen your other comment about inequality where I literally provided numbers and you disagreed without providing any counter-data.
Let's call this a day and move on.
Which anecdotes? You haven't even provided anecdote just baseless disagreement statements lol.
Might as well just plug your ears with your fingers and yell "lalalala I can't hear you lalalala" or just fart and call that an argument.
BTW, i did provide a source in the inequality comment. Check again.
Also how else do you want to measure waiting times in my country vs the US except comparing my experiences with the people I know living there on similar jobs? It's not like my government made statistics against the US health system to compare so comparing with my work colleagues from the US is the best I can do. You're just being contrarian for the sake of trolling.
Please provide some information if you disagree ,even anecdotes, because otherwise you're wasting everyone's time or you enjoy trolling.
https://wisevoter.com/country-rankings/healthcare-wait-times...
https://www.oecd-ilibrary.org/sites/242e3c8c-en/1/3/2/index....
Let's not glamorize the American system just because the European system is struggling in its own way.
> For years, economists have defined the economic health of a country by its gross domestic product. Trouble is, every time a forest falls, the GDP goes up. With every oil spill, the GDP goes up. Every time a cancer patient is diagnosed, the GDP goes up. Is this how we measure economic progress? Economists must learn to subtract.
https://en.m.wikipedia.org/wiki/Parable_of_the_broken_window
This isn't totally farfetched: in some countries if you own your house you pay tax on the rent you would have paid to yourself [0]. Taxing someone for feeding or educating himself seems like a small and natural next step.
"Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children. The cost of one modern heavy bomber is this: a modern brick school in more than 30 cities. It is two electric power plants, each serving a town of 60,000 population. It is two fine, fully equipped hospitals. It is some fifty miles of concrete pavement. We pay for a single fighter with a half-million bushels of wheat. We pay for a single destroyer with new homes that could have housed more than 8,000 people.... This is not a way of life at all, in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron."
https://en.m.wikipedia.org/wiki/Chance_for_Peace_speech#The_...
Complaining about this fact is as productive as complainig about gravity: if only we could float around effortlessly, imagine how much we would save on bridges and roads and fuel!
It can still be argued that it's worth the expenditure. But the cost should be weighted against the alternatives. Neither Russia or China can be said to threaten the US with their military, except with nuclear weapons, but no defence budget protects against those.
Also, the US Navy protects vital global sea lanes that benefit US trade.
Also:
> Neither Russia or China can be said to threaten the US with their military
China is arming up at a huge pace, even outside of nukes.
No one suggested that it isn't beneficial.
What I said is that the benefit has to be weighted against the alternative benefits.
> China is arming up at a huge pace, even outside of nukes.
I'd argue that one large reason they're doing so is the threat they perceive themselves to be under from the large US military.
Don't fall into that trap.
That sounds like a difficult position to maintain...
Are you from China?
They don't have a real need for a bigger army, they could for sure defend themselves against any neighbor, even India and Russia, with "just" the military from 20 years ago.
what?!? what do missile defense systems do then? nothing?
An article I picked at random:
https://breakingdefense.com/2022/02/no-us-missile-defense-sy...
To strive for peace is not near sighted, it is the only way forward.
You can’t prove that regional conflicts would erupt should the US become more isolationist but any history book should quickly show you human’s propensity for war.
It also turns out that human’s tend not to outright attack foes that will immediately decimate them.
The USAF is the greatest stabilizer this world has as far as I can tell, missteps and outright awful moves like Iraq taken into account in this calculation.
Both the US and Russia have used their weapons to decimate other economies. It is very hard for us to prove or disprove your point.
Americans don't even know what genuine "national defense" feels like. Instead, we have a world-class propaganda complex dedicated to rationalizing our unnecessary overseas military adventures and proxy wars.
The idea that blowing up a government or tribe in Africa or Asia to open up resource extraction (natural or financial) for a Western MNC will benefit the "freedom" of the average American is totally absurd.
I think it glosses over too much complexity to simply state that, because part (not all! Geography is the other part) of the reason why we are so secure is that people know that we have that strong military. If the US were known as a soft target, who had neither the will nor the means to defend itself, we would probably see other actors much more willing to do things to us, such as piracy, etc.
There's an in-between the US and Somalia when it comes to control of territory.
We spend far more than we need to, and Eisenhower is 100% correct in the things we are giving up when we overspend on military.
I'm curious what you know about Eisenhower and his career — it's hard to imagine anyone in the past century whose background and experience made him less myopic than he.
Do you think that Eisenhower, a professional soldier and 5 star general, doesn't understand that? You're not understanding / misrepresenting what he is saying in that quote. It's about the cost of a military and how it has to be balanced against the productive and social needs of a country. A country that is grossly over-spending on the military, as Eisenhower perceived it already back then, and particularly in the case of the US, when that military is used for force and power projection, not defence, is strangling the society that it pretends to protect. This has been the history of the US over at least the last 50 years (when Eisenhower made this fore-warning speech).
But that, while possibly more important than what I'm about to say, is not what I really did want to say. Which is --)
Eisenhower uses a phrase of considerable rhetorical power here --
> those who hunger and are not fed, those who are cold and are not clothed.
-- because he is essentially quoting the Beatitudes, and anyone who is familiar with them will fill in the rest.
Slightly less powerful to me (because it seems to equally reference William Jennings Bryan), but still very strong is
> humanity hanging from a cross of iron.
which is again extremely Christian imagery.
I'm not sure these phrases resonate so strongly with people today, but in those days they went straight to the heart of the question: What is it that is good?
I also really like the sentence,
> This is not a way of life at all, in any true sense.
because it focuses on the dichotomy of life vs. death, which again I think is very important. One could go in very positive green directions also from here. Some adjacent words would be: flourishing, abundant, fertile, growing. Frankly pagan things.
And, things that our economic metrics again tend to discount.
Yes, obviously so! Diagnosing cancer early is one of the best ways to save someone from it. The cancer is there anyway, it's a natural occurrence. The economic activity that leads to and follows a cancer diagnosis is what economists call wealth: the things we do for each other than make each side mutually better off.
All the examples are like that. Nobody wants oil to spill, but accidents are a fact of life. The GDP created by mopping it up on the other hand leads to a cleaner environment, which is another form of wealth.
> smoothly transporting oil without incident makes less GDP than spilling it.
Oil creates huge economic activity when used. It does no good spread over the ocean. The cleanup generates activity, but it's clearly far better for GDP to smoothly transport oil around than constantly lose it, if only because ships constantly sinking would cause people to transport things way less and so markets would be less efficient, yielding less wealth.
I'm surprised at the number of people who are confidently arguing against mrb - they're exactly correct here. The point of PPP adjustments is to factor out the effect of having a strong currency, and the USD's status as reserve currency is exactly why the US GDP has been overtaking the EU. Adjust for what a dollar actually buys you domestically and the picture is far more muddled.
USD was the reserve currency in the 90s and mid 2000s. Back then the Euro was very strong and some large European countries were close to overtaking US in GDP per capita.
The last 10 years have more or less been a lost decade in most of Western Europe because (amongst other things) it almost entirely missed out on the tech boom.
It sure as hell does for the millions employed thereby, as well as those who catch their spending.
- In general, GDP PPP per capita correlates pretty well with quality-of-life.
- In the case of US versus EU, it doesn't for this precise reason.
The amount of GDP I need to be happy is decent food, housing, education, basic entertainment (e.g. a nice park with a free concert, or a pleasant beach), and medical.
I get all of those in the (lower-income) EU country I normally visit, cheaply, and without much stress. $10k / year provides an adequate quality-of-life. That's not hard to make there, so people pick the careers they want. In the (high cost-of-living) area I spend time in the US, one needs around $150-200k / year to be stress-free. People do work like programming, biotech, law, finance, etc. to make it here.
Are you, like, talking about the cost of a gallon of gas or something? Because I can cherry pick whatever numbers you like to craft a reductive substance-free assertion about the state of the US energy production and distribution system.
No argument on the hospital admins, tho (although it’s nice to have at least one in your social circle, so they can get you in with the top tier actual practitioners).
Furthermore, economic growth is measured in "real" dollars, aka, excludig inflation. If US prices doubled as you say, then their economy is therefore now four times as large in the new, inflated dollars.
None of this has anything to do with fiat currency. The same would be true if you measured in kg's of gold, but you'd have to account for the gold-cost of living ratio instead of fiat dollar inflation.
Using the World Bank's figures in 2015-dollars https://data.worldbank.org/indicator/NY.GDP.MKTP.KD?location...
GDP 2008 US: 16.38T EU: 13.19T US/EU: 1.24
GDP 2022 US: 20.95T EU: 15.21T US/EU: 1.38 (2023 not yet available)
Ratio of ratios: 1.11, so the US has increased its lead by about 11%, which is not nothing, but also less dramatic than it looks to me in the "current prices" chart.
Sometimes lying with numbers is way, way to easy...
American housing is built the way it is not due to extra interest in safety, but because it's cheap to build under US prices. You can call it better or worse than Europe, but it sure isn't earthquakes.
Wood buildings can last hundreds of years but require far more upkeep.
HVAC also can generally also be run under floors (and outside of the USA forced air systems are pretty unusual so you're only dealing with pipes).
This was the case but it's not really true any more. Building codes have become more stringent and risk specific. This hasn't changed anything around earthquakes though as as building a single story wood building that stands up to an earthquake is easy, building one that withstands a hurricane is harder.
Sorry to put it this way, but is this a joke? I do live in Bucharest, in Eastern Europe, on the 8th floor of an apartments building built in the early 1980s, and I sure do hope that this building can withstand a Magnitude 8 earthquake seeing that we've had a 7.5 earthquake back in 1977 and a 7.7 one back in 1940 (and a 7.1 earthquake back in 1986, which I do remember).
When the huge construction boom began in Cluj in the first decade of the new millennium, the common opinion seemed to be that the old, ugly socialist-era blocks would survive an earthquake just fine, but people were less confident about the new buildings that private developers were constructing.
This is how modern European brick houses are built:
https://stock.adobe.com/de/images/unfinished-brick-house-sti...
You're looking for "discretionary income" minus groceries (not to be confused with disposable income), because GDP does not tell you that (PPP adjusted or not) and PPP adjusted income doesn't tell you that either. Also you kind of made a jump from (per capita) GDP to income, which is related, but not the same thing.
To answer your question: In your example it may either be more or less, because PPP really does not say much for anything but your chosen basket of goods.
Example: Person A earns $2000 and spends $750 to meet standard of living X, while another person B also earns $2000 but has to spend $1500 to meet that same standard.
Adjusted for PPP using that standard of living/basket of goods X, Person A earns twice as much.
Let's assume that MacBooks and trips to Korea generally cost the same for both people. Person B has $500 left over to pay for such things, while Person A has $1250 left - more than twice!
I easily could have chosen numbers such that it was less than twice. I could also have chosen them such that one person, while appearing richer purely based on non-adjusted income, can in fact afford less of everything. Obviously you can also make it so that one person can afford less luxuries than the other despite appearing richer adjusted for PPP.
You can try to fix this by making any luxuries you're interested in part of your basket of goods. While you're still comparing an entire basket, at least you'll know how often each person could purchase that entire basket compared to each other.
The point I'm trying to make is that while you still have to be careful to understand what PPP adjusted numbers are telling you, non-adjusted numbers aren't any better and in fact are probably more misleading for what you appear to be interested in.
PPP is weird. Many of my costs were higher when living in China since imported things were more expensive, and there were lots of extra taxes to consider. It didn’t feel like I had more PPP except when eating out and consuming services. You definitely can’t use PPP to buy imports.
If you are used to the lifestyle of the western upper middle class and consume the associated products, the effects of the PPP adjustment will not be that meaningful to you. The same isn’t true for people who have to use most of their income to buy basic necessities like shelter, food, transportation and so forth.
PPP is also a deeply flawed concept because comparing the quality of goods and services in the context of different consumption patterns. However if you really want to use you should look at median income (with social transfers etc.) rather than GDP.
For instance, a country that accepts more lower-skilled immigrants will see its median income figures grow less than countries that accept fewer of those immigrants. Is the immigrant-accepting country poorer as a result?
The only way that median income would be a valid measure of wealth or QoL would be if you isolated the cohort of those considered "median" in 2008 and tracked their wealth over time.
> Is the immigrant-accepting country poorer as a result?
Yes, in this specific case it would be poorer per capita.
With some important caveats:
1. Balance of trade. The goods and services in the poorer nation are worth less, comparatively. Any trade with the richer nation will lead to a wider balance of trade deficit. This causes all kinds of structural economic and budget problems in the long term.
2. Foreign purchasing power. Customers have to substitute goods and services away from the richer nation to poorer nations. If one’s preferred television, for example, is produced in the richer nation, these will become more expensive, and will force consumers to purchase other options. This is especially acute in cases where a nation has a de facto monopoly on certain industries.
In reality, both nominal and PPP GDP figures are important to monitor for different reasons.
That's not necessarily true, depending on how the PPP is calculated it may not reflect the cost of imported food or energy or other necessities.
Cheap imports are great for consumers, but a currency losing 20% certainly doesn't mean its economy has magically contracted 20%. If anything a weakish currency stimulates internal economic activity as it's good for exports.
The US economy is also not nearly "twice that of the EU", in nominal terms either - it's about 50% bigger. The (silly) chart is for the eurozone.
Seriously, the US always had a somewhat bigger/stronger economy, but a cheap dollar at the time made nominal almost equal, which was misleading. Now, the US still has a slightly bigger economy, and has had better growth, while the price of the dollar makes it look like a massive difference, which is also misleading. The true output difference is high single digit. Why are you pretending otherwise?
https://www.oecd.org/sdd/prices-ppp/purchasingpowerparities-...
Also GDP, GDP PPP and every other economic benchmark is calculated using CID - constant US dollar; specifically to avoid skewing results due to fluctuating exchange rates.
> This swing is the main driver of this whole thing and means that yes, PPP is superior for looking at growth.
It is technically incorrect on every level. As GDP PPP fundamentally is unsuitable for calculating growth.
The GDP of Greece pre crash was $355B today it’s $219B, it’s GDP PPP pre-crash was $341B today it’s $389B if you think the Greek economy grew over that period or that today it’s a better place to live in with 11% unemployment and youth unemployment approaching 40% with the entire population having its wealth cut by nearly half than pre-2008 Greece then I have an island in the Aegean to sell you…
That is all.
What it may or may not say about Greece is utterly irrelevant because that's not what I was talking about.
If you want to say it's a more accurate model then you need to defend it more broadly.
The GDP wa invented by a russian working for US bureau of statistics during the great depression. It was a helpful measure to compare performance of different US evonomic sectors. It favors deficit spending to saving.
It is a very inadequate measure for people wealth in any developed economy.
Obviously, nominal GDP per capita matters for international vacations.
No.
It doesn’t know how much money you have, it doesn’t measure the purchasing power of individuals. It also is based on a basket of 3000 fungible goods and services without accounting for value of quality or outcomes; as explained already in this thread.
It doesn’t take into account median income, income and wealth inequality, unemployment rates or any other factor that probably matters more than how much a bag of potatoes or a new highway costs.
Bulgaria has a worse GDP PPP per capita than Russia and many other far worse places. Guyana has a better GDP PPP per capita than France or Canada.
Greece’s GDP PPP per capita and in general is now higher than its pre-2008 crash, its nominal GDP however is still nearly half of what it was.
Youth unemployment is nearly at 40% with overall unemployment at 10-11% which is still masked by the fact that many people were still able to retire early over the past decade as they were still eligible for the 60 year retirement age (and earlier for certain occupations).
None of these factors alone can be used to extrapolate how well people are doing it take far more in-depth and even somewhat subjective analysis.
For example Norways GDP PPP per capita is about 30% higher than that of Finland however the average Norwegian is probably not better off than the average Finn especially not by “30%”.
Using GDP PPP per capita or otherwise as a rebuttal for economic stagnation due to lack of GDP growth is disingenuous at best and dangerous at worse.
No per-capita metric does this. You have to use things like the median wage to capture the purchasing power of individuals. For example, Equatorial Guinea's GDP/c is among the highest in Africa, but due to insanely high inequality and oppression, people are better off in Senegal or Rwanda. Guyana, which recently discovered large oil reserves, is a less extreme example of the same thing.
I swear I don’t remember the last time I’ve seen this low level of topical knowledge in a post on HN as this one.
Whether it's better to take the median income or the per capita GDP (which is closer to the mean income) to represent the "typical" person is a different question.
Countries like Ireland and Singapore have per capita GDPs that are 10-30% higher than the US, yet median wages are lower.
Wikipedia even has section explaining why:
Many of the leading GDP-per-capita (nominal) jurisdictions are tax havens whose economic data is artificially inflated by tax-driven corporate accounting entries.
Given that, PPP is better than nominal, however you compute the average.
GDP isn't distributed evenly. PPP doesn't effect the distribution. It's just an adjustment.
An oil state like Russia has a decent GDP, but the distribution is horrendous. It doesn't matter if you look at GDP or GDP PPP. Neither gives you a great picture "what you can buy" unless you're in the top 1%.
I've just started to read Graham Allison's Graham Allison (supposedly based on this article [1]) and the exact opposite remark is made at the beginning of that book, i.e. that one should use PPP numbers instead of nominal GDP numbers when looking at the quality of life.
[1] https://www.theatlantic.com/international/archive/2015/09/un...
GDP per capita (PPP or not) is a bad (and very lazy) indicator to use if you’re trying to measure QOL.
The reality is that there American system sucks by some metrics, and yet by others which are real and not BS, the US economy crushes.
In the end human flourishing, and life satisfaction are more important than GDP, but at the same time GDP is real and it does matter.
It's similar to people who insist that folks in New York or San Francisco are better off than folks in Texas because of higher incomes, without adjusting for cost of living. If that was true, domestic net migration patterns wouldn't look the way they do. Yes, folks in New York or San Francisco can buy more MacBooks, but that's not a useful metric.
At least such a huge difference will have practical effects.
Can we fund our welfare systems without growth? (Just imagine what we could do, if the budget was 2x)
Americans who are between the ages of 15 and 35 feel like the ladder has been pulled up out of their reach, and they've felt this way for the past decade. Mostly because property owners have reaped most of the benefits of the past two decades.
https://www.cnbc.com/2021/10/18/the-wealthiest-10percent-of-...
https://www.bls.gov/blog/2023/more-ways-to-look-at-wages-and...
https://data.worldbank.org/indicator/NY.GDP.MKTP.PP.CD?locat...
Now, I have no idea what thebdifference between constant USD, current USD and the international versions are, and wpupd be happy if someone cpuod explain it since the differences are huge, but measured in curren international USD, the EU and US GDP charts move more or less in parallel with the EU one being a little bit lower. But of course, a chart that shows a huge delta developing makes for much better headlines, and more eyeballs on the article...
EDIT: Just played around some more, the numbers only allow for sensationalism whem using current USD, taling any other constant value the story is a lot different. And the root cause seems to be two periods, 2012 - 2014 when the EU GDP growth was significantly below US growth (it was negative for the EU in 2012 and 2013), and 2020 (EU -5.7, US -2.8). So, if everything it is old news, or worse just a wrong representation of data to justify headlines and narratives (looking at you WSJ, not some Twitter thread).
https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?end=2...
GDP chart in constant 2015 USD:
https://data.worldbank.org/indicator/NY.GDP.MKTP.KD?location...
The common (and relevant measure) is real gdp growth or growth minus inflation. (And per capita if that is your concern.)
Not yet, anyway.
Canada and France have better QoL than Guyana at similar PPP GDP because of more equal distribution. They also happen to have higher non-PPP GDP but it's unrelated - it's accidental that in this case PPP normalization modifies the PPP GDP comparison to correlate less with QoL difference.
[ X ] Doubt
So can GDP.
> PPP isn’t a good measure for population’s wealth or quality of life especially for developed economies either.
Why isn't it a good measure? Why is it worse than pure GDP?
> The economy of the US is still twice that of the EU and its global purchasing power has also pretty much doubled.
The GDP of the US is twice of that of the EU. How does paying $2000 for a 50 sq. feet box makes your economy bigger?
No, not really as exchange rate fluctuations are avoided using constant international dollar benchmarks.
> Why isn't it a good measure? Why is it worse than pure GDP?
This been explained multiple times in this thread already including a link to the OECD FAQ on GDP PPP.
Nominal GDP isn’t a measure of individual wealth either, it is however a very good indicator of national economic growth.
>The GDP of the US is twice of that of the EU. How does paying $2000 for a 50 sq. feet box makes your economy bigger?
GDP PPP doesn’t include housing costs, at least not directly it includes a component which is called imbued rent which tends to grossly underestimate the actual cost of housing in a given country.
Housing in the EU is generally more expensive than in the US both to rent and to buy nearly every country has a massive housing shortage and inflated prices.
My partner bought a flat in Poland as an investment in March this year for the equivalent sum of ~£160,000, it’s a 48 sq/m 2 bed flat.
The 2nd stage of the development on an adjacent plot is starting now with the prices around £180-190K for an equivalent property.
And this is in a village 50km from Krakow… (Bochnia).
There are ways for GDP to increase while economy contracts. As the simplest example, an informal sector may become formalized and be partially reduced in the process due to new bureaucratic obstacles.
> This been explained multiple times in this thread already including a link to the OECD FAQ on GDP PPP.
I don't see OECD FAQ claiming anything close to what you imply. It actually claims that "The major use of *PPPs is as a first step in making inter-country comparisons* in real terms of gross domestic product (GDP) and its component expenditures."
> Nominal GDP isn’t a measure of individual wealth either, it is however a very good indicator of national economic growth.
A nitpick: if we talk about growth, we should talk about the change in GDP. Anyway, how is the change in nominal GDP any better than the change in GDP PPP?
> GDP PPP doesn’t include housing costs, at least not directly it includes a component which is called imbued rent which tends to grossly underestimate the actual cost of housing in a given country.
The rent is included directly. Imputed rent is fictitious income that exists to account for housing services homeowners provide to themselves to make comparisons easier between situations where the rate of homeownership is different. If it grossly underestimates the actual cost of housing, it simply means it is calculated incorrectly. As a sidenote, for lots of other services such adjustments are not made (eg eating out vs cooking at home, paying a housekeeper vs cleaning yourself).
> Housing in the EU is generally more expensive than in the US both to rent and to buy nearly every country has a massive housing shortage and inflated prices.
I don't think any EU city can compare to the US juggernauts such as NY and SF in terms of housing shortage and inflated prices.
PPP cannot be used to measure growth, period.
Nominal GDP increase indicates an increased production, PPP increase indicate absolutely nothing. In fact PPP often increase or maintains its level in times of crisis when income level drops and unemployment rises.
The US is far bigger than NY and SF and even then many EU cities can more than compare… The housing stock is far cheaper in the US and you get far far more for your money.
Yeah, and it says "Uses with limitations: To analyse changes over time in relative GDP per capita and relative prices".
> PPP cannot be used to measure growth, period.
> PPP increase indicate absolutely nothing.
No, refer to paragraphs 32-34 of the overview from the PPP Manual: https://www.oecd.org/sdd/prices-ppp/PPP%20manual%20revised%2...
> Nominal GDP increase indicates an increased production
No, it doesn't. Value = price x volume. If value has gone up, it means either price or volume had gone up, but you cannot say more than that; for that you need real GDP.
> In fact PPP often increase or maintains its level in times of crisis when income level drops and unemployment rises.
Yeah, GDP and GDP PPP are both imperfect metrics. They are just proxies and should be treated as such.
> The US is far bigger than NY and SF and even then many EU cities can more than compare… The housing stock is far cheaper in the US and you get far far more for your money.
So what? It doesn't change the fact that nominal GDP fails horribly as a metric for such cases.
Zurich, London, Paris and Munich
Also median income in SF and NY is much higher (with the exception of Zurich) so it should be much easier for an average person to afford a home in NY than in Munich.
Isn’t real estate generally cheaper in the US than in Western Europe in PPP terms?
To me, economy isn’t an abstract thing to be measured without taking people’s quality of life into perspective. That just feels too much like stats for the sake of stats.
The PPP based measurement is way more interesting.
It has limited applications for developing economies and measuring AIC which it was initially conceived.
Here is a good breakdown of what it is, how it’s constructed and more importantly what it can and cannot measure.
https://www.oecd.org/sdd/prices-ppp/purchasingpowerparities-...
Regardless of how you slice it the national purchasing power of the US has doubled since 2008 whilst the EU’s has stagnated.