>I worry that this understates the problem. On many of the key
>international questions, using PPP *reverses* what people would
>otherwise - and more fairly - assume are "the facts". This reversal
>is arbitrary and not justified. PPP numbers are presented as
>statistics, but they are in fact a knowingly biased recalculation of
>"real" statistics portraying an imaginary world that does not (and
>can not) exist.
I think that's overstating the case. Most people know that an $18,000 income in rural Mississippi would buy you a very different standard of living from $18,000 in Queens. A PPP exercise is an attempt to model that intuition more rigorously - without, of course, running into the complexities of exchange rates. But doing international comparisons does run into the exchange rate problem. $18,000 = EUR 21,780 at yesterday's close, but what kind of life would those market-identical amounts buy you in, say, Amsterdam vs. Chicago? A normal person (i.e., a noneconomist) considering the question might ask, "Well what's rent? Food? Gas?" And PPP programs try to answer that. There are lots of problems - defining market baskets, defining comparable products, valuing social services. But I don't think it's fatally flawed from the outset.
Doug
PS: I'd also add that PPP has the fortunate side-effect, from an elite perspective, of making the poor seem less poor. Are Chinese incomes 3% of U.S. incomes (which they are on market exchange) or 12% (PPP version)? Or somewhere between? Or can we not say because the whole effort to compare is fucked?