Is Mississippi as Poor as Britain? | Hacker News Reader

Is Mississippi as Poor as Britain?

mspolicy.org

3 pointsgscott5 comments

> Last year, by my math, the U.K.’s output per person was $45,485; Mississippi’s was higher, at $47,190. If Britain were invited to join the U.S. as the 51st state, its citizens would be at the bottom of the table for per capita GDP. Some might say that for Mississippi, that is still disconcertingly close.

> “That’s not fair!” the critics would counter. “When you compare the wealth of nations, you need to look at how far the money goes. Things cost more in the U.K. than in Mississippi.” To adjust the raw numbers, the argument goes, you need to use an economist’s tool called Purchasing Power Parity. Sure enough, when you consider differences in the price of things in Britain and America, the U.K. does appear richer than Mississippi. Thus, after such PPP adjustments, the Financial Times analyst suggested that for 2021 Mississippi’s per capita GDP was a mere $46,841 to the U.K.’s $54,590 (though conceding that, without the London effect, much of Britain was relatively poorer than the Magnolia State).

I don't understand this. Things cost more in UK than Mississippi, therefore UK's purchasing power parity goes up? Shouldn't their purchasing power be lower if cost of goods and services are higher?

You have it backwards. Mississippi residents earn more than UK ones at current $/£ exchange rates, but the costs of goods and services in Mississippi are so much higher than in the UK that once you include that difference in your comparison, the relationship flips.

I'm quoting the article.

"Things cost more in the U.K. than in Mississippi"

Things imported from a third country, such as China, sort of cost more. PPP is strongly affected by the cost of locally grown potatoes, locally made milk, locally performed plumbing repairts. PPP is about adjusting exchange rates to keep "cost of one plumber hour" fixed across several countries, the cost of buying USB sticks made in China is kind of then "more expensive" in a country where the cost of getting a plumber of otherwise "low", with both "more expensive" and "low" a matter of definition.

Both plumbers' rates and USB sticks flow into the calculations, of course. The previous paragraph is simplified.

I think the article just got a bit muddled.

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