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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
by 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.
- deleted 3y ago[deleted]
- dogma1138 3y agoExactly, your GDP PPP can be double that of the US and it does you absolutely squat if the median wage is 10 times lower. 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.
- thanksbucko 3y agoThanks for posting clarifications and disputations, seriously. I naively thought all the PPP business meant something that I’ve since learned it does not.
- HWR_14 3y agoIt's orthogonal. Nominal GDP (or income) is if you took it to the money exchange and turned it into the same global currency (say US Dollars or Euros). PPP GDP (or income) takes into account how much stuff you can buy. 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.
- refurb 3y agoYou can see this by the top countries in GDP per capita. 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.
- HWR_14 3y agoThat's not really relevant. I didn't say it was the best measure, I said PPP GDP is better than nominal GDP. All you did was argue that there are better measures. Both which I agree with and is irrelevant. Sure, median income is better than mean income. Given that, PPP is better than nominal, however you compute the average.
- deleted 3y ago[deleted]