Talk: Purchasing power parity

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I believe it to be highly unjustified that sources like

the

CIA Factbook and The Economist

display the GDP only via PPP (purchasing power parity) without giving at all a note what this parity is based upon.

There should always be a total figure of Gross Domestic Product to get an idea what the country is really producing.

It doesn't make any sense to measure an economy on how expensive T-Shirts and Big Macs are.

To display the PPP in this sense is highly unprofessional and DECEIVING!

It is understandable that the CIA Factbook is using the PPP to sex up the U.S. statistics, because pure numbers the US has a slighly lower GDP than Germany and a much lower GDP than Japan.

I am not completely against the PPP, however there should be a link on what is actually included (neither at the CIA Factbook website nor on the Economist website I could find this) and in addition they should state the real GDP, which they do not do.

Using the PPP in this way is highly deceiving and does not enable to form an objective picture but is highly subjective !

PPP is a scam used by economists, and it is without any connections to reality.

I don't have a stand on this, but that paragraph was extremely unprofessional, not to mention unrelated.

Vacuum 23:15, Jan 2, 2004 (UTC)

Actually the factbook does give the source, check the definitions section. --Voodoo 00:09, 6 May 2004 (UTC)

"Major rewrite"

• I've just done a major rewrite. The new version clarifies what the PPP method is, what it's used for and why, and what issues it has. I also removed all references to a PPP "theory." PPP is a method, not a theory. I know of no theory saying that "in equilibrium, the exchange rate that will prevail between two countries will be that which equalizes the prices of traded goods in each country." The whole point of using PPP is that using real exchange rates, goods won't cost the same amount in different countries. Isomorphic 01:46, 10 Jun 2004 (UTC)
  • Because of so called arbitrage some prices strive towards a common price. For example prices for precious metals like gold doesn't range widely across borders. Gold ([1]) cost $420 US dolllars per troy ounce in most parts of the world. If it sold for $200 bucks per ounce in Canada or even China it would sell out pretty quick. While things like a Big Mac is not as easily arbitraged across wide distances.

 ?

• The article states "If a Big Mac costs USD$4 in the US and GBP£3 in Britain, the PPP exchange rate would be £3 for $4." and "while in the US, GDP per capita was about $27,500 and the PPP was $36,000". So if the PPP burger cost $4 in the states, how much does the burger cost in the dollar for dollar currency market? Can you even trade US dollars for US dollars? Please clarify this.
• Do not be confused by for example the IMF numbers that show a disparity between US PPP and Nominal numbers ([2]), it's simply because of different GDP base numbers, the USD to USD PPP and Market exchange rates is of course alwys 1.0. Thanks - Jerryseinfeld 00:00, 11 Oct 2004 (UTC)
  • Since no one else would correct the errors, I wrote a "clarification". - Thanks - Jerryseinfeld 13:08, 28 Oct 2004 (UTC)