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PPP is very useful when comparing different economies. The 'Big Mac Index' (published by the Economist magazine) attempts to do this simply. Exchange rates don't mean a lot when you're talking about people because a 1:1 purchasing ratio doesn't exist. 1 rupee doesn't buy you in India what 1 dollar buys you in the USA, so the exchange rates only make sense when you know what a meal costs or something like that. 7 yuan in China is 1 dollar, but buys you much more than it does in the US. PPP accurately reflects this.

posted 5 years, 2 months ago
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Do you pay attention to the GDP?
Not much, and I'm in business and sustainability. It doesn't measure the things that I'm after because it doesn't measure non-monetary benefits.

Is it an accurate measure of economic health?
No, because social problems, such as health care issues and environmental cleanup, are positives in the GDP. Unemployment is not accurately measured in this country either. But it is the least expensive method because of the systems we have in place; our systems are designed to track dollar movements, and creating a new one will take some effort and investment in ourselves--investment that I think would be worth it but is currently being squandered elsewhere on projects that will never pan out economically.

What are the alternatives?
NDP: Net Domestic Product, some sort of economic and social metric, such as lands preserved, waste being recycled/reused/reduced, and farmland being organically harvested. Combine that with mean and median incomes, unemployment, population growth rate, and even a happiness index (http://www.grossinternationalhappiness.org/) and you may get a clearer picture as to what is going on. The problem with statistics and numbers, especially when they are one-sided, is that you don't get a quality for the numbers. A NDP would, to me, reflect the negative aspects of society and deduct them from the GDP: as I mentioned before, health care, environmental cleanup, etc. Having many numbers, though, helps to get the real picture. One can never boil down an entire economy into one number. One dimension is never enough to get the real picture. The mean and the median incomes show a very different picture of how people are doing in our economy, as an example.

What is your personal economic barometer?
I have a few things. If I have to be mindful of my money and budget every last scrap (I call it the 'college economy'), then I don't think I'm doing very well. I've been living a very inexpensive and simple life for a long time, so doing anything extra shouldn't be all that hard. I also measure my ability to invest in myself or my home. If I can take a class at a college or can invest in long-term project in my home, then I think I'm doing really well. Lastly, my capacity for emergencies: if someone steals my bike or breaks one of my windows, the length of time for me to be able to respond to that is a metric of how well I'm doing.

posted 5 years, 2 months ago
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