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> 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 i

> 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.
- dogma1138 3y ago
  There is literarily a table in the FAQ flr what PPP can be used for and what it cannot be. PPP cannot be used to measure growth, period. Nominal GDP increase indicates an increased production, PPP increase indicate absolutely nothing. In fact PPP often increase or maintains its level in times of crisis when income level drops and unemployment rises. The US is far bigger than NY and SF and even then many EU cities can more than compare… The housing stock is far cheaper in the US and you get far far more for your money.
  - LudwigNagasena 3y ago
    > There is literarily a table in the FAQ flr what PPP can be used for and what it cannot be. Yeah, and it says "Uses with limitations: To analyse changes over time in relative GDP per capita and relative prices". > PPP cannot be used to measure growth, period. > PPP increase indicate absolutely nothing. No, refer to paragraphs 32-34 of the overview from the PPP Manual: https://www.oecd.org/sdd/prices-ppp/PPP%20manual%20revised%202012.pdf https://www.oecd.org/sdd/prices-ppp/PPP%20manual%20revised%2... > Nominal GDP increase indicates an increased production No, it doesn't. Value = price x volume. If value has gone up, it means either price or volume had gone up, but you cannot say more than that; for that you need real GDP. > In fact PPP often increase or maintains its level in times of crisis when income level drops and unemployment rises. Yeah, GDP and GDP PPP are both imperfect metrics. They are just proxies and should be treated as such. > The US is far bigger than NY and SF and even then many EU cities can more than compare… The housing stock is far cheaper in the US and you get far far more for your money. So what? It doesn't change the fact that nominal GDP fails horribly as a metric for such cases.
- ffhhttt 3y ago
  > 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. Zurich, London, Paris and Munich Also median income in SF and NY is much higher (with the exception of Zurich) so it should be much easier for an average person to afford a home in NY than in Munich.

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.

dogma1138 3y ago
There is literarily a table in the FAQ flr what PPP can be used for and what it cannot be. PPP cannot be used to measure growth, period. Nominal GDP increase indicates an increased production, PPP increase indicate absolutely nothing. In fact PPP often increase or maintains its level in times of crisis when income level drops and unemployment rises. The US is far bigger than NY and SF and even then many EU cities can more than compare… The housing stock is far cheaper in the US and you get far far more for your money.
- LudwigNagasena 3y ago
  > There is literarily a table in the FAQ flr what PPP can be used for and what it cannot be. Yeah, and it says "Uses with limitations: To analyse changes over time in relative GDP per capita and relative prices". > PPP cannot be used to measure growth, period. > PPP increase indicate absolutely nothing. No, refer to paragraphs 32-34 of the overview from the PPP Manual: https://www.oecd.org/sdd/prices-ppp/PPP%20manual%20revised%202012.pdf https://www.oecd.org/sdd/prices-ppp/PPP%20manual%20revised%2... > Nominal GDP increase indicates an increased production No, it doesn't. Value = price x volume. If value has gone up, it means either price or volume had gone up, but you cannot say more than that; for that you need real GDP. > In fact PPP often increase or maintains its level in times of crisis when income level drops and unemployment rises. Yeah, GDP and GDP PPP are both imperfect metrics. They are just proxies and should be treated as such. > The US is far bigger than NY and SF and even then many EU cities can more than compare… The housing stock is far cheaper in the US and you get far far more for your money. So what? It doesn't change the fact that nominal GDP fails horribly as a metric for such cases.
ffhhttt 3y ago
> 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. Zurich, London, Paris and Munich Also median income in SF and NY is much higher (with the exception of Zurich) so it should be much easier for an average person to afford a home in NY than in Munich.