4 ms·

GDP has something to do with income, certainly. But I think that the article's author suffers a fundamental failing of understanding of why people look at GDP

GDP has something to do with income, certainly. But I think that the article's author suffers a fundamental failing of understanding of why people look at GDP per capita. It's not because they're trying to understand the experience of individuals within the country at all -- it's because they're trying to understand how rich the country is, normalized to its size.

awhitby 4y ago
True as far as it goes, but the fair response to this is: who really cares how rich a country is, normalized to its size? In the If you care about the country as people, then median is better as you point out. But if you care about the country as country, then total is generally more interesting (to understand, say, military power). China's a big deal despite not being particularly rich per capita. On the other hand, the leaders in per capita GDP, outliers like Macau and Luxembourg, are not usually countries people are interested in.
- grog454 4y ago
  A per capita metric might have a lot more influence on where someone chooses to live, at least for those privileged enough to have a choice.
- aetherson 4y ago
  For example, you are trying to figure out which country has a good pro-growth policy regime. You don't want to imagine that India, let's say, has done better at economic development than South Korea, despite India's higher GDP. As one of many examples.
- junofan 4y ago
  GDP per capita is a yardstick for labor productivity. I’m generally interested in the cost of doing business in various places. GDP per capita is a good metric.
  - Aperocky 4y ago
    > GDP per capita is a yardstick for labor productivity. Or how much oil will gush out of the ground if you drill a hole in the right place.
    - hammock 4y ago
      >drill a hole >labor I believe you are saying the same thing
      - myownpetard 4y ago
        Only if the value of a hole of equivalent dimensions is constant and independent of location. There's a whole Disney movie that demonstrates not all holes are created equal.
        PeterisP 4y ago
        Well no, the whole point of measuring country differences in labor productivity is that in some countries spending x hours to drill a hole in the ground is vastly more productive than in others.
        myownpetard 4y ago
        The point here is that, if we want to use GDP as a proxy for labor productivity, then including wealth from extractive industries isn’t that useful because it tells us much more about the geology of the country then about the labor force.
  - tomjakubowski 4y ago
    It's a yardstick for productivity per capita, from both labor and capital. I mean, I guess that's just saying "gross domestic product per capita" in different words.
- pif 4y ago
  > median is better as you point out As the grandparent post correctly stated, median GDP cannot be computed. In cannot even be defined!
  - rbanffy 4y ago
    It assumes a normal-ish distribution. Mode would be a better single-number measure, but it’s the income x number of people curve that carries the important message.
    - pif 4y ago
      You didn't read the opening comment from jstx1, did you? GDP is not income. Personal GDP is not defined.
      - rbanffy 4y ago
        I'm sorry I didn't make myself clearer. I'm not talking about GDP, but income (which has a distribution curve). OTOH, we can see that curve in a global context, of GDP per capita across countries. It's a boring curve, very power-law ish with slightly odd peak in the 30K-40K region. https://imgur.com/a/BqsQDT9 https://imgur.com/a/BqsQDT9
- rbanffy 4y ago
  > But if you care about the country as country, A useful measure would be GPD per billionaire. Since they amass political power alongside the economic one, they are de facto political leaders.
beebmam 4y ago
> GDP has something to do with income, certainly. So do a million other measurements. I'm pretty certain you could find some level of correlation with virtually any measurement and income levels. Thus, this is an irrelevant statement.
- deleted 4y ago
  [deleted]
cycomanic 4y ago
> GDP has something to do with income, certainly. Well I'd say that GDP is much more like revenue than income. You're certainly correct that they are related, as income is typically some percentage of revenue (even negative) however the actual percentage is different for every entity, so it somewhat meaningless. > But I think that the article's author suffers a fundamental failing of understanding of why people look at GDP per capita. It's not because they're trying to understand the experience of individuals within the country at all -- it's because they're trying to understand how rich the country is, normalized to its size. Completely agree. Generally there are better metrics if you want to look at the income distribution for a country, e.g. the Gini index.
- JumpCrisscross 4y ago
  > GDP is much more like revenue than income There isn't a great analogy for it on the individual or corporate level. GDP is a measure on transactions within a system. A person can't meaningfully transact within themselves.
sleton38234234 4y ago
And, let's not forget, "how rich the country is", should be in astericks. It's not adjusted for PPP and therefore it's more a measure of how strong the country's currency is. A country with GDP per capita of x10 times higher than another's doesn't mean, the average person is x10 times richer or even x1 as rich as the other country. And, even when it is adjusted for PPP, the basket of goods tends to be skewed towards less relevant purchases, rather than the essentials of life, thus making it somewhat innacurate. I've closely compared my own standard of living with someone else in a developing country. And, my country's GDP per capita was over x20 her country's. And, I was surprised to find how closely our material standard of living was: it was pretty much even: (taking into account, number and type of appliances, living space, eating out frequency, quality of food, access to education, water and electricity).

awhitby 4y ago

True as far as it goes, but the fair response to this is: who really cares how rich a country is, normalized to its size? In the If you care about the country as people, then median is better as you point out. But if you care about the country as country, then total is generally more interesting (to understand, say, military power). China's a big deal despite not being particularly rich per capita. On the other hand, the leaders in per capita GDP, outliers like Macau and Luxembourg, are not usually countries people are interested in.

grog454 4y ago
A per capita metric might have a lot more influence on where someone chooses to live, at least for those privileged enough to have a choice.
aetherson 4y ago
For example, you are trying to figure out which country has a good pro-growth policy regime. You don't want to imagine that India, let's say, has done better at economic development than South Korea, despite India's higher GDP. As one of many examples.
junofan 4y ago
GDP per capita is a yardstick for labor productivity. I’m generally interested in the cost of doing business in various places. GDP per capita is a good metric.
- Aperocky 4y ago
  > GDP per capita is a yardstick for labor productivity. Or how much oil will gush out of the ground if you drill a hole in the right place.
  - hammock 4y ago
    >drill a hole >labor I believe you are saying the same thing
    - myownpetard 4y ago
      Only if the value of a hole of equivalent dimensions is constant and independent of location. There's a whole Disney movie that demonstrates not all holes are created equal.
      - PeterisP 4y ago
        Well no, the whole point of measuring country differences in labor productivity is that in some countries spending x hours to drill a hole in the ground is vastly more productive than in others.
        myownpetard 4y ago
        The point here is that, if we want to use GDP as a proxy for labor productivity, then including wealth from extractive industries isn’t that useful because it tells us much more about the geology of the country then about the labor force.
- tomjakubowski 4y ago
  It's a yardstick for productivity per capita, from both labor and capital. I mean, I guess that's just saying "gross domestic product per capita" in different words.
pif 4y ago
> median is better as you point out As the grandparent post correctly stated, median GDP cannot be computed. In cannot even be defined!
- rbanffy 4y ago
  It assumes a normal-ish distribution. Mode would be a better single-number measure, but it’s the income x number of people curve that carries the important message.
  - pif 4y ago
    You didn't read the opening comment from jstx1, did you? GDP is not income. Personal GDP is not defined.
    - rbanffy 4y ago
      I'm sorry I didn't make myself clearer. I'm not talking about GDP, but income (which has a distribution curve). OTOH, we can see that curve in a global context, of GDP per capita across countries. It's a boring curve, very power-law ish with slightly odd peak in the 30K-40K region. https://imgur.com/a/BqsQDT9 https://imgur.com/a/BqsQDT9
rbanffy 4y ago
> But if you care about the country as country, A useful measure would be GPD per billionaire. Since they amass political power alongside the economic one, they are de facto political leaders.

beebmam 4y ago

> GDP has something to do with income, certainly. So do a million other measurements. I'm pretty certain you could find some level of correlation with virtually any measurement and income levels. Thus, this is an irrelevant statement.

deleted 4y ago
[deleted]

cycomanic 4y ago

> GDP has something to do with income, certainly. Well I'd say that GDP is much more like revenue than income. You're certainly correct that they are related, as income is typically some percentage of revenue (even negative) however the actual percentage is different for every entity, so it somewhat meaningless. > But I think that the article's author suffers a fundamental failing of understanding of why people look at GDP per capita. It's not because they're trying to understand the experience of individuals within the country at all -- it's because they're trying to understand how rich the country is, normalized to its size. Completely agree. Generally there are better metrics if you want to look at the income distribution for a country, e.g. the Gini index.

JumpCrisscross 4y ago
> GDP is much more like revenue than income There isn't a great analogy for it on the individual or corporate level. GDP is a measure on transactions within a system. A person can't meaningfully transact within themselves.

sleton38234234 4y ago

And, let's not forget, "how rich the country is", should be in astericks. It's not adjusted for PPP and therefore it's more a measure of how strong the country's currency is. A country with GDP per capita of x10 times higher than another's doesn't mean, the average person is x10 times richer or even x1 as rich as the other country. And, even when it is adjusted for PPP, the basket of goods tends to be skewed towards less relevant purchases, rather than the essentials of life, thus making it somewhat innacurate. I've closely compared my own standard of living with someone else in a developing country. And, my country's GDP per capita was over x20 her country's. And, I was surprised to find how closely our material standard of living was: it was pretty much even: (taking into account, number and type of appliances, living space, eating out frequency, quality of food, access to education, water and electricity).