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No one uses PPP for measuring growth, GDP PPP can increase whilst your economy contracts. PPP isn’t a good measure for population’s wealth or quality of life e

No one uses PPP for measuring growth, GDP PPP can increase whilst your economy contracts. 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.

aaomidi 3y ago
Completely depends on what you’re measuring. 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.
- dogma1138 3y ago
  Again PPP cannot by definition used to measure growth. 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-frequentlyaskedquestionsfaqs.htm 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.
flangola7 3y ago
We don't care about size of economy, we care about aspects of daily life of the average person.
- _Parfait_ 3y ago
  ..Ok but we're talking about the size of the economy you do know that right? Did you read even the headline?
  - flangola7 3y ago
    The title of a headline does not dictate what I get to think and talk about. I'm not twelve.
    - vjjsejj 3y ago
      > I’m not twelve Not yet, anyway.
      - flangola7 3y ago
        What a useless comment.
    - _Parfait_ 3y ago
      You seem emotional about these facts. I'll let you get on with your day.
      - flangola7 3y ago
        I didn't say anything about emotions. Are you confused?
- dogma1138 3y ago
  PPP isn’t a good or any indicator of that either, Guyana has a higher GDP PPP per capita than France or Canada, Bulgaria is below Russia and Kazakhstan.
  - fulafel 3y ago
    Both are flawed proxies for QoL but PPP less so. 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.
- coeneedell 3y ago
  We care about both, so we use different measurements for both.
  - aerio 3y ago
    >We care about both [ X ] Doubt
mrb 3y ago
"GDP PPP can increase whilst your economy contracts." 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.
- dogma1138 3y ago
  No it does not, PPP is calculated based on a basket of 3000 fungible goods and services as well as other costs such as major infrastructure construction projects. 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.
  - kranke155 3y ago
    I know people who lived in the USSR in the 1970s and missed it.
    - dogma1138 3y ago
      Good for them, I know plenty others who didn’t including my entire family. 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.
htfu 3y ago
In 2008 the dollar was historically cheap (70% of current), now it's pretty expensive. This swing is the main driver of this whole thing and means that yes, PPP is superior for looking at growth. Not ideal, but much better. 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?
- dogma1138 3y ago
  PPP cannot be used to measure growth at all on any level. https://www.oecd.org/sdd/prices-ppp/purchasingpowerparities-frequentlyaskedquestionsfaqs.htm 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.
  - htfu 3y ago
    *Real GDP, chart is nominal...
    - dogma1138 3y ago
      ? I’m replying to your statement: > 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…
HWR_14 3y ago
Isn't PPP per capita a better measure of quality of life than nominal GDP per capita? I care about what I can buy. Obviously, nominal GDP per capita matters for international vacations.
- unmole 3y ago
  > Isn't PPP per capita a better measure of quality of life than nominal GDP per capita? No.
- dogma1138 3y ago
  No, GDP PPP doesn’t measure what you can buy it measure how much things cost. 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.
  - scythe 3y ago
    >It doesn’t know how much money you have, it doesn’t measure the purchasing power of individuals. 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.
rayiner 3y ago
I think Americans would disagree with the implication that the US has done particularly well over the last 15 years, even though going by nominal dollars that seems to be the case.
- JackFr 3y ago
  That’s true, and it’s the point. 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.
  - rayiner 3y ago
    I think the issue is more than the divergence between what nominal GDP suggests and what people feel demonstrates that nominal GDP is not a useful metric. It essentially measures your ability to buy things denominated in USD. Some of those things are important and others are peripheral. But the purchasing power of most of the important USD-denominated goods is already reflected in the PPP adjustment. So that leaves the peripheral stuff. So for example, the standard of living in South Korea is probably closer to the country's $45,000 PPP GDP per capita, than to its $35,000 nominal GDP per capita. It doesn't really make a difference that South Koreans can purchase fewer MacBooks and must instead buy Samsung products. 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.
  - jopsen 3y ago
    > at the same time GDP is real and it does matter. 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)
- vkou 3y ago
  Americans with wealth or property have done great for themselves. They currently feel that the economy is in the dumps, but that's just because talking heads on Fox are telling them that it is. They can't articulate why the economy is in the dumps. 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.
LudwigNagasena 3y ago
> GDP PPP can increase whilst your economy contracts. 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?
- dogma1138 3y ago
  > So can GDP. 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).
  - LudwigNagasena 3y ago
    > No, not really as exchange rate fluctuations are avoided using constant international dollar benchmarks. 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.
soligern 3y ago
Why isn’t it a good measure? It costs maybe $0.50 to get a reasonable full meal in India, you’re not going to get anything close to that in the US. In second tier cities in India, people can rent a reasonable studio for $50/month, you’re not getting that anywhere in the US. Why shouldn’t that be a relevant metric?
- rjzzleep 3y ago
  Because obviously then all the MBA's, business consultants and other useless services industries don't get the real value they deserve on paper.
theonlybutlet 3y ago
For this purpose you're not measuring growth but rather comparing it against someone else who uses a different currency.
throwaway4good 3y ago
Sorry mate - I think you got that one turned on its head. The common (and relevant measure) is real gdp growth or growth minus inflation. (And per capita if that is your concern.)
jhoechtl 3y ago
GDP isn’t a good measure for population’s wealth or quality of life especially for developed economies either. 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.
hef19898 3y ago
I am by no means an economic expert, but I shared this chart yesterday, GDP 2008-2022 in current international dollar: https://data.worldbank.org/indicator/NY.GDP.MKTP.PP.CD?locations=EU-US&start=2008 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=2022&locations=EU-US&start=2008&view=chart 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?locations=EU-US&start=2008 https://data.worldbank.org/indicator/NY.GDP.MKTP.KD?location...
solardev 3y ago
Explain?
paganel 3y ago
> No one uses PPP for measuring growth, 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/united-states-china-war-thucydides-trap/406756/ https://www.theatlantic.com/international/archive/2015/09/un...
- ffhhttt 3y ago
  Growth is not the same quality of life. GDP per capita (PPP or not) is a bad (and very lazy) indicator to use if you’re trying to measure QOL.

aaomidi 3y ago

Completely depends on what you’re measuring. 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.

dogma1138 3y ago
Again PPP cannot by definition used to measure growth. 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-frequentlyaskedquestionsfaqs.htm 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.

flangola7 3y ago

We don't care about size of economy, we care about aspects of daily life of the average person.

_Parfait_ 3y ago
..Ok but we're talking about the size of the economy you do know that right? Did you read even the headline?
- flangola7 3y ago
  The title of a headline does not dictate what I get to think and talk about. I'm not twelve.
  - vjjsejj 3y ago
    > I’m not twelve Not yet, anyway.
    - flangola7 3y ago
      What a useless comment.
  - _Parfait_ 3y ago
    You seem emotional about these facts. I'll let you get on with your day.
    - flangola7 3y ago
      I didn't say anything about emotions. Are you confused?
dogma1138 3y ago
PPP isn’t a good or any indicator of that either, Guyana has a higher GDP PPP per capita than France or Canada, Bulgaria is below Russia and Kazakhstan.
- fulafel 3y ago
  Both are flawed proxies for QoL but PPP less so. 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.
coeneedell 3y ago
We care about both, so we use different measurements for both.
- aerio 3y ago
  >We care about both [ X ] Doubt

mrb 3y ago

"GDP PPP can increase whilst your economy contracts." 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.

dogma1138 3y ago
No it does not, PPP is calculated based on a basket of 3000 fungible goods and services as well as other costs such as major infrastructure construction projects. 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.
- kranke155 3y ago
  I know people who lived in the USSR in the 1970s and missed it.
  - dogma1138 3y ago
    Good for them, I know plenty others who didn’t including my entire family. 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.

htfu 3y ago

In 2008 the dollar was historically cheap (70% of current), now it's pretty expensive. This swing is the main driver of this whole thing and means that yes, PPP is superior for looking at growth. Not ideal, but much better. 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?

dogma1138 3y ago
PPP cannot be used to measure growth at all on any level. https://www.oecd.org/sdd/prices-ppp/purchasingpowerparities-frequentlyaskedquestionsfaqs.htm 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.
- htfu 3y ago
  *Real GDP, chart is nominal...
  - dogma1138 3y ago
    ? I’m replying to your statement: > 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…

HWR_14 3y ago

Isn't PPP per capita a better measure of quality of life than nominal GDP per capita? I care about what I can buy. Obviously, nominal GDP per capita matters for international vacations.

unmole 3y ago
> Isn't PPP per capita a better measure of quality of life than nominal GDP per capita? No.
dogma1138 3y ago
No, GDP PPP doesn’t measure what you can buy it measure how much things cost. 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.
- scythe 3y ago
  >It doesn’t know how much money you have, it doesn’t measure the purchasing power of individuals. 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.

rayiner 3y ago

I think Americans would disagree with the implication that the US has done particularly well over the last 15 years, even though going by nominal dollars that seems to be the case.

JackFr 3y ago
That’s true, and it’s the point. 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.
- rayiner 3y ago
  I think the issue is more than the divergence between what nominal GDP suggests and what people feel demonstrates that nominal GDP is not a useful metric. It essentially measures your ability to buy things denominated in USD. Some of those things are important and others are peripheral. But the purchasing power of most of the important USD-denominated goods is already reflected in the PPP adjustment. So that leaves the peripheral stuff. So for example, the standard of living in South Korea is probably closer to the country's $45,000 PPP GDP per capita, than to its $35,000 nominal GDP per capita. It doesn't really make a difference that South Koreans can purchase fewer MacBooks and must instead buy Samsung products. 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.
- jopsen 3y ago
  > at the same time GDP is real and it does matter. 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)
vkou 3y ago
Americans with wealth or property have done great for themselves. They currently feel that the economy is in the dumps, but that's just because talking heads on Fox are telling them that it is. They can't articulate why the economy is in the dumps. 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.

LudwigNagasena 3y ago

> GDP PPP can increase whilst your economy contracts. 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?

dogma1138 3y ago
> So can GDP. 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).
- LudwigNagasena 3y ago
  > No, not really as exchange rate fluctuations are avoided using constant international dollar benchmarks. 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.

soligern 3y ago

Why isn’t it a good measure? It costs maybe $0.50 to get a reasonable full meal in India, you’re not going to get anything close to that in the US. In second tier cities in India, people can rent a reasonable studio for $50/month, you’re not getting that anywhere in the US. Why shouldn’t that be a relevant metric?

rjzzleep 3y ago
Because obviously then all the MBA's, business consultants and other useless services industries don't get the real value they deserve on paper.

theonlybutlet 3y ago

For this purpose you're not measuring growth but rather comparing it against someone else who uses a different currency.

throwaway4good 3y ago

Sorry mate - I think you got that one turned on its head. The common (and relevant measure) is real gdp growth or growth minus inflation. (And per capita if that is your concern.)

jhoechtl 3y ago

GDP isn’t a good measure for population’s wealth or quality of life especially for developed economies either. 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.

hef19898 3y ago

I am by no means an economic expert, but I shared this chart yesterday, GDP 2008-2022 in current international dollar: https://data.worldbank.org/indicator/NY.GDP.MKTP.PP.CD?locations=EU-US&start=2008 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=2022&locations=EU-US&start=2008&view=chart 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?locations=EU-US&start=2008 https://data.worldbank.org/indicator/NY.GDP.MKTP.KD?location...

solardev 3y ago

Explain?

paganel 3y ago

> No one uses PPP for measuring growth, 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/united-states-china-war-thucydides-trap/406756/ https://www.theatlantic.com/international/archive/2015/09/un...

ffhhttt 3y ago
Growth is not the same quality of life. GDP per capita (PPP or not) is a bad (and very lazy) indicator to use if you’re trying to measure QOL.