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PPP makes no sense when it comes to comparing data usage between countries. Data is not based on same supply/demand characteristics as physical goods. It is qui

PPP makes no sense when it comes to comparing data usage between countries. Data is not based on same supply/demand characteristics as physical goods. It is quite literally arbitrary. Much like most software you buy/subscribe to. Ever bought a digital product at 90% discount during Black Friday or Cyber Monday? Why don't you find physical products with 90% discounts (unless it is a clearance sale)? Because you can't discount cost involved in acquiring raw materials and labour cost. Digital products on the other hand can be duplicated infinite times with zero additional cost. So is anything connected to it (which includes data, storage and processing). Sure there is some cost involved. But at scale that cost becomes negligible. You can't produce physical products at scale without the cost also scaling proportionally. Even in India, before Jio made its entry, data was extremely expensive. Horrible speeds, very low data limits and no competitive pricing (you can say that it was a data cartel of sorts). Jio disrupted the entire sector. All ISPs reduced prices overnight. How could they do it? Wouldn't it hit their bottom line? Nope! They never went into loss in the first place. They charged exorbitant rates because they could. Not because there was some basis for it. That monopoly was disrupted. That is all there is to it. And with a billion+ people in the country, ISPs will never go under loss for selling data for few cents - a dollar. Rather, they are probably making more than they ever did. Jio showed them the way to price correctly.

tchalla 6y ago
> PPP makes no sense when it comes to comparing data usage between countries. We are not comparing data usage, we are comparing the value of two different currencies. The value of 100 US$ in India is different from that in the US or the EU. In order to normalise the value between two currencies, PPP is used. It doesn't matter what the 100US$ is spent on, data or food.
- shripadk 6y ago
  > We are not comparing data usage, we are comparing the value of two different currencies. The value of 100 US$ in India is different from that in the US or the EU. In order to normalise the value between two currencies, PPP is used. It doesn't matter what the 100US$ is spent on, data or food. But you are comparing value of currencies by comparing two equal goods. That would mean also comparing acquisition of raw materials, labour costs, import/export of goods, availability of resources etc which is never going to be the same. PPP itself has shortcomings (you can read them here: https://www.yourarticlelibrary.com/international-trade/15-criticisms-against-the-ppp-theory-with-figure-international-trade/26060 https://www.yourarticlelibrary.com/international-trade/15-cr...). For example, India might have abundance of rice while USA might have shortage of rice. But rice is used for making noodles in both countries and demand for rice is equivalent in both countries. Would you price it according to PPP index? Nope. You take into account any tariffs imposed by host country. What about transport? What about labour costs? There are so many variables that can influence the pricing of a product. PPP is a bad way to judge cost of living and cost of goods/services. If PPP is 21.3 (2019 data) between USA and India, a Harley Davidson in India should be 21.3 times cheaper than a Harley Davidson in USA. It isn't. The cost is pretty much the same. So is the case with iPhones. Even if iPhones are manufactured in India it would still cost slightly less than in USA. It will never be 21.3 times cheaper. Also, let us take Big Mac Index into account. It was a humorous take on PPP devised by economists to compare the costs of a Big Mac between countries (as McDonalds maintained standards between countries). Now the cost of a Big Mac in India and a Big Mac in US might not reflect the true PPP of the country because it all depends on the appetite of Indians for a Big Mac. We are avid consumers of street food. Street food for us is what is McDonalds for Americans. Now how can you make McDonalds as a standard for the World when in my part of the World a tiny percentage of the population visits McDonalds to consume their delicious burgers while a large percentage eats street food? Wouldn't that obviously influence the price of a McDonalds burger in India as the demand for it is next to non-existent? Now let me reverse the case and say that India tomorrow undergoes a massive cultural change and everyone shifts from eating street food to eating at a McDonalds burger joint. What would the price of a Big Mac in India be then? Obviously with high demand the cost falls rapidly. PPP should blow up right? But does that truly reflect the standard of living between two countries? That is a food for thought for you.
  - tchalla 6y ago
    > If PPP is 21.3 (2019 data) between USA and India, a Harley Davidson in India should be 21.3 times cheaper than a Harley Davidson in USA. It isn't. The cost is pretty much the same. So is the case with iPhones. Even if iPhones are manufactured in India it would still cost slightly less than in USA. It will never be 21.3 times cheaper. PPP does not mean that Harley Davidson in India would be 21.3 times cheaper. It means that the value of Harley Davidson in India in US$ would be equivalent in the US when the price is 21.3x If you do not like PPP, you can use another metric to normalise prices. But, you can not simply compare two goods in two different currencies by taking an exchange rate. You need a normalisation factor. Every metric has its shortcoming - pick one but don't compare absolutes.
    - shripadk 6y ago
      > It means that the value of Harley Davidson in India in US$ would be equivalent in the US when the price is 21.3x You lost me here. Can you elaborate on this more please? When it came to data comparisons you literally did multiply 21.3 with 9 cents and arrived at the value of 1.91$ per GB. So how is your comparing data costs using PPP as a normalizing factor fine but not fine when it comes to me comparing cost of manufacturing an iPhone or a Harley Davidson in both countries? Your argument isn't consistent. How can you ignore exchange rate and only look at PPP and decide the cost of living? It just doesn't make sense to me. Sure PPP gives a rough idea about where countries stand relative to the US when it comes to purchasing power parity but, more often than not, it is too far off from ground reality.
      - tchalla 6y ago
        Let me once again repeat what I have said and please take some time to listen and understand it * You can not compare goods across two countries by simply taking the exchange rate, you need to normalise to account for different factors like disposable income * I took PPP as the normalisation metric. It is not perfect but is meant for this purpose. * If you are not happy with PPP as a normalisation metric, you can choose another one as defined by economists. If you want to come up with your own, you are also free to take another metric and agree with economists to use them. The metrics you have suggested are already considered in the PPP calculations. Look into them Key Point : You can NOT compare good(s) across two different countries/currencies in absolute values.

tchalla 6y ago

> PPP makes no sense when it comes to comparing data usage between countries. We are not comparing data usage, we are comparing the value of two different currencies. The value of 100 US$ in India is different from that in the US or the EU. In order to normalise the value between two currencies, PPP is used. It doesn't matter what the 100US$ is spent on, data or food.

shripadk 6y ago
> We are not comparing data usage, we are comparing the value of two different currencies. The value of 100 US$ in India is different from that in the US or the EU. In order to normalise the value between two currencies, PPP is used. It doesn't matter what the 100US$ is spent on, data or food. But you are comparing value of currencies by comparing two equal goods. That would mean also comparing acquisition of raw materials, labour costs, import/export of goods, availability of resources etc which is never going to be the same. PPP itself has shortcomings (you can read them here: https://www.yourarticlelibrary.com/international-trade/15-criticisms-against-the-ppp-theory-with-figure-international-trade/26060 https://www.yourarticlelibrary.com/international-trade/15-cr...). For example, India might have abundance of rice while USA might have shortage of rice. But rice is used for making noodles in both countries and demand for rice is equivalent in both countries. Would you price it according to PPP index? Nope. You take into account any tariffs imposed by host country. What about transport? What about labour costs? There are so many variables that can influence the pricing of a product. PPP is a bad way to judge cost of living and cost of goods/services. If PPP is 21.3 (2019 data) between USA and India, a Harley Davidson in India should be 21.3 times cheaper than a Harley Davidson in USA. It isn't. The cost is pretty much the same. So is the case with iPhones. Even if iPhones are manufactured in India it would still cost slightly less than in USA. It will never be 21.3 times cheaper. Also, let us take Big Mac Index into account. It was a humorous take on PPP devised by economists to compare the costs of a Big Mac between countries (as McDonalds maintained standards between countries). Now the cost of a Big Mac in India and a Big Mac in US might not reflect the true PPP of the country because it all depends on the appetite of Indians for a Big Mac. We are avid consumers of street food. Street food for us is what is McDonalds for Americans. Now how can you make McDonalds as a standard for the World when in my part of the World a tiny percentage of the population visits McDonalds to consume their delicious burgers while a large percentage eats street food? Wouldn't that obviously influence the price of a McDonalds burger in India as the demand for it is next to non-existent? Now let me reverse the case and say that India tomorrow undergoes a massive cultural change and everyone shifts from eating street food to eating at a McDonalds burger joint. What would the price of a Big Mac in India be then? Obviously with high demand the cost falls rapidly. PPP should blow up right? But does that truly reflect the standard of living between two countries? That is a food for thought for you.
- tchalla 6y ago
  > If PPP is 21.3 (2019 data) between USA and India, a Harley Davidson in India should be 21.3 times cheaper than a Harley Davidson in USA. It isn't. The cost is pretty much the same. So is the case with iPhones. Even if iPhones are manufactured in India it would still cost slightly less than in USA. It will never be 21.3 times cheaper. PPP does not mean that Harley Davidson in India would be 21.3 times cheaper. It means that the value of Harley Davidson in India in US$ would be equivalent in the US when the price is 21.3x If you do not like PPP, you can use another metric to normalise prices. But, you can not simply compare two goods in two different currencies by taking an exchange rate. You need a normalisation factor. Every metric has its shortcoming - pick one but don't compare absolutes.
  - shripadk 6y ago
    > It means that the value of Harley Davidson in India in US$ would be equivalent in the US when the price is 21.3x You lost me here. Can you elaborate on this more please? When it came to data comparisons you literally did multiply 21.3 with 9 cents and arrived at the value of 1.91$ per GB. So how is your comparing data costs using PPP as a normalizing factor fine but not fine when it comes to me comparing cost of manufacturing an iPhone or a Harley Davidson in both countries? Your argument isn't consistent. How can you ignore exchange rate and only look at PPP and decide the cost of living? It just doesn't make sense to me. Sure PPP gives a rough idea about where countries stand relative to the US when it comes to purchasing power parity but, more often than not, it is too far off from ground reality.
    - tchalla 6y ago
      Let me once again repeat what I have said and please take some time to listen and understand it * You can not compare goods across two countries by simply taking the exchange rate, you need to normalise to account for different factors like disposable income * I took PPP as the normalisation metric. It is not perfect but is meant for this purpose. * If you are not happy with PPP as a normalisation metric, you can choose another one as defined by economists. If you want to come up with your own, you are also free to take another metric and agree with economists to use them. The metrics you have suggested are already considered in the PPP calculations. Look into them Key Point : You can NOT compare good(s) across two different countries/currencies in absolute values.