Purchasing Power Comparisons

Great chart comparing GDP per person:

Source: Carpe Diem

I don’t normally think of the great state of Mississippi as an economic powerhouse, but compared to the European Union countries, it is doing very well. In fact, Mississippi scores higher (in terms of GDP or economic activity per person) than all of continental Europe. The only country over there that scores higher is the United Kingdom.

This comparison is based on purchasing power parity (PPP) which attempts to compare economies that have very different price levels for basic goods and services. The most famous example of using PPP is the Big Mac Index which is described by the Economist this way:

‘…[the Big Mac Index] is based on one of the oldest concepts in international economics, purchasing power parity (PPP), the notion that a dollar, say, should buy the same amount in all countries. In the long run, argue ppp fans, currencies should move towards the exchange rate, which equalises the prices of an identical basket of goods and services in each country. In this case, the basket is a McDonalds’ Big Mac, which is produced in more than 100 countries. The Big Mac PPP is the exchange rate that would leave hamburgers costing the same in the United States as elsewhere..’

So, even though a worker might make much less in Mississippi, for example, than in France., it could also be true that housing and even Big Macs could cost less too. Therefore, economists attempt to measure the relative size of two economies using PPP in order to get a more accurate picture of the economic activity of a given state or country.

Comments

[NUCLEAR1929:]

when there is no purchasing, there is no power

Sep 08 04:38 PM

[chap08:]

Sorry but, having been to all of these places, Mississippi is not the place to be. I could list several factors, but just take hours worked. French workers, for example, get 37 days of paid leave p.a. and a baseline working week of 35 hours. Ask them if they would like to adopt American work culture for a few thousand extra $ and you get a short answer. There's some good cheese there too.

Sep 08 04:52 PM

[whidbey:]

The CIA fact book is dated and biased as well. If you want good data look at the OECD data which is at least annually revised. The facts you quote are difficult to compare as the prior comment suggests.

Sep 08 05:05 PM

[drewriders:]

Of course Mississippi is high. They get almost twice as much in federal tax revenue then what they pay in taxes. Give thanks to Trent Lott folks.

www.taxfoundation.org/...

Sep 08 05:13 PM

[Pat C:]

Your comparing apples to oranges. I don't buy it.

Sep 08 06:50 PM

[Ponchovilla:]

Be careful using Carpe Diem as a reference. It is more political than economic commentary. Dr Perry falls in the perma bull camp with Larry Kudlow and Dennis Kneale. I looked at city data Mississipi and the per capital income is $15,853, median household income $31,300, average home sales price $71,400.

Per capita GDP may not be the best measure of households in Mississippi.

PS Give em hell Whidbey. Always respect your comments.

Sep 08 08:58 PM

[nobby73:]

"There are lies, damn lies and statistics."

This seems to be a combination of all of the above....

Sep 09 02:10 AM

[colion:]

The key thing is that for an equivalent item in the listed foreign countries the cost is approximately 30% more than in the U.S. So, when healthcare debaters throw numbers around about the cost of healthcare in the U.S. versus other major countries the difference cited reflects an understatement of the relative cost in those countries and does not take into account differences in a variety of things such as access to healthcare, access to medical technology, etc.

As an aside, the standard comparison cited for comparing healthcare of life expectancy is a red herring. As a British Member of Parliament recently noted, what counts is not the life expectancy of the population, which reflects a variety of things such as life style, but the outcome once disease set in. On that basis the U.S. is head and shoulders above countries like the U.K. So, to be sure there are lies, damn lies and statistics.

Sep 10 10:56 AM