To: TobagoJack who wrote (210216 ) 1/14/2025 3:19:25 PM From: carranza2 Read Replies (2) | Respond to Purchasing power parity comments are, if not exactly absurd, certainly on the fringe. They display ignorance of the concept, otherwise you would have tempered your comments with a bit of intellectual honesty rather than as background beat music to yet another China! China! screed. Purchasing power parity requires a a comparison of identical baskets of goods and services while comparing dissimilar countries. A dreadfully difficult task. The McDonald's quarter pounder index is a very gross comparison but rather than for one item, the PPP comparison is made across a wide basket of things. In other words, if you are going to use PPP for anything meaningful, the reasonably correct statistics and methodology matter more than in other comparisons. Purchasing power parity does not account for consumers different tastes. Or their preferences. Or the quality of the purportedly identical items. Example: A chicken in Peking could be fed trash, be horribly cooked, horribly preserved, full of e. coli, while a chicken in the US is typically OK thanks to a number of things, all of which increase quality. And, of course, quality chickens come at a higher price. I'll take an American-raised free range organic chicken from Whole Foods or better everyday over an imported Chinese chicken which, thank God, aren't sold here. How can parity be measured for even chickens, a huge component of the food PPP basket? And how, exactly, do you account for services in a purchase parity model? Or the costs of education, which are exorbitant in the US? As you probably know, it costs a pretty penny to send a child to an Ivy League school. But you and your family made a choice, probably consistent with the fact that such an education is a terrific asset. How do you ever engage in a PPP comparison for such an education, which is costly? And housing? Forget about it. The IMF uses PPP but has substantial reservations. It is statistical miasma. imf.org
