[lbo-talk] GDP per capita/Dougs comments

[Wojtek Sokolowski]

Doug:
> 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.

I think the problem with the ppp is that it tries to account for the
fact that in certain economies non-market transactions constitute a
significant part of the economy - not captured by the GDP statistics
(otherwise, exchange rate would suffice for comparative purposes).  That
may include barter, women's work, neighbours helping each other, etc.,
which in the national accounts lingo are "outside the boundaries of
production."  That is, btw, a big point often raised by feminists (the
non-pomo variety) - that women's house work does not count in national
economic stats.  So the problem is a certain double standard -
non-market contributions do not count for some purposes (e.g. to measure
the contribution of women's work) but are introduced through the back
door (ppp) to defend a different ideological claim that poor countries
are not as poor as they seem.

Wojtek