The methodology finally addresses a pet peeve of mine to adjust based on prices and hours worked: "we ranked 178 countries using three measures. The first is GDP per person at market exchange rates. It is simple and intuitive, and widely cited. But it ignores price differences between countries. The second measure adjusts incomes for these local costs (known as purchasing-power parity, or PPP). This offers a better guide to living standards but one that takes no account of leisure time: the share of people in work, and how long they work, varies by country. Our final yardstick accounts for both local prices and hours worked"
NB: "average" can mean any of three measures of central tendency: the mean (sum/count), the median (middle value), or the mode (most frequently occurring value). All three may be valid choices in specific contexts.
Whilst it's common to interpret "average" as "mean", this isn't strictly accurate or reliable.
The Economist's article errs in failing to distinguish which measure of central tendency is actually meant by "average".
Can someone more versed in macro economics clarify to me, to what extent "price differences between countries." goes?
Like are we just comparing simple goods: grocery, white wares, cars, fuel/electricity etc the price of these things there. Or are we also considering things such as: need to save money for Healthcare, University, credit card transaction fee, housing cost (mortgage), required amount of fuel for basic functioning of everyday life?
The latter is basically stuff that is either cheap or free in certain places while astronomically high in other (US, but I guess housing price is everywhere if city).
I feel like layman AND economist doesn't truly account (or even understand) how different some countries have it on those metrics; A person in Tokyo or most capital cities in Europe can get away with ZERO fuel + car cost, while for Americans that's a death sentence. Same for Healthcare. So comparing those prices doesn't even make sense to begin with, but leaving it out is a major boost to places where salaries are high (US) but the (hidden) cost are not measured.
> The latter is basically stuff that is either cheap or free in certain places
Healthcare is absolutely not free anywhere. It maybe that the costs are indirect via government taxation and benefits are curtailed via rationing or simply unavailability of certain types of care.
Sure. But that again depends on calculation? If we are talking about "disposable income" in the average statistic (after tax) then ofc anywhere that does it through tax will have lower purchasing power because it's (easy to be) included. While places where it's mostly out of your pocket (or private) you can only really do an educated guess.
Ofc it's not free. But the point is that in the way you calculate, it can present as free. My question is to what extent do they calculate
And seems to vary with the economic situation just like everywhere else.
Plus quite a few North African countries ... well, they're just lying. Look at Egypt, even Tunisia ... these figures are just not possible, they're either misclassified or just lies.
Highest income country would be a more accurate title here I think. My country (Ireland) has a high income now but has been poor for centuries, we lack many markers of wealthy countries like subways, extensive motorway networks etc. We are well on our way to being a rich country, but not there yet.
Is that true though, quick bit of Googling has Ireland and Netherlands in many but not all Top 10 lists and none at the top. When it comes to citizens using off-shoring to evade tax, the more literal reading of your point, neither Irish nor Dutch people appear in the top ten lists I’ve come across.
There's different taxes for individuals and for companies. Hence different countries are tax havens for individuals vs companies. Ireland is worse than UK for individuals' tax, but under the minimum tax for companies (despite signing more than one treaty (one at OECD, one at EU) to raise company taxes, then not doing it, in other words: the Irish government simply lied, with the net result that the EU is talking about reintroducing taxes when money crosses any border, including any EU border. It is, predictably, turning into a complicated disaster, like EU VAT tax. Thank you Ireland)
Companies evade EU taxes in Ireland, these days without Netherlands. Individuals evade EU taxes in London, Monaco or Luxembourg.
Yes, for instance the UK would probably fare very differently if London (which can itself feel like a foreign country to non-Londoners in the UK) was removed and the country's wealth re-evaluated.
it should try. because it's using gdp per capita it's stating that it cares how the entire gdp is averaged out over the entire population. the more inequality there is the less useful or representative this averaging out is
Rich countries, even with inequality, will generally still have good institutions and infrastructure and poor people are better off there despite their income being low.
Measuring median also ignores that the upper middle can be doing very well, as it's literally just a slice from the 50th percentile.
It's like the US, where the top 10% make as much as the top 1% in Canada (as an example), but if you simply take the median it ignores the massive middle and upper middle class in the US.
This doesn't take into account resources in the ground, otherwise it would need to show how rich the so-called "poor" countries locked into debt slavery and colonized infrastructure/governance the "rich" countries continue to impose on them.
If the measures ignore the sources of wealth discovered and not yet extracted, it doesn't accurately indicate what's happening. The whole story is left untold. Not reporting worth basing economic decisions on, except to hire better economists.
The article is entirely about income and not at all about wealth. Content was a little surprising given the title, but I wouldn't see the point of a comprehensive wealth analysis given the resource curse you allude to.
Singapore's rise is amazing. They don't have oil or other natural resources. Singapore adopted free-market capitalism, encouraged foreign direct investment and positioned itself as an attractive destination for multinational corporations. They invested heavily in technical and higher education, ensuring a highly skilled workforce. Singapore is consistently top-three in mathematics and science performance.
It has a unique geography and serves as a link between western and Chinese trade routes. The fact that it is Mandarin friendly also helped a lot of Chinese to move their profits there
Singapore is an interesting case because it looks great on paper but it’s arguably one of the worst/best form of authoritarianism. For example, ~80% of Singaporeans live in public housing, which they don’t technically own (99 year lease), whose rules are dictated by a government agency. Eg, there are police cameras right up to the apartment lifts and every entry/exit; the number of pets they’re allowed to own is regulated and interestingly less than those living in private property arbitrarily (without consideration for property size). Nevermind the complete lack of civil liberties and high gini coefficient/inequality.
Living in a police state can be awesome, if you don’t want to dissent. Way less crime, no homeless drug users living on the city streets, etc. For a law-abiding middle-class person, Singapore isn’t too terrible
If living in the US means contending with roving gangs of masked men snatching up people off the streets, looking at living conditions in other police states, like how their housing policy means ordinary middle class people can still afford a place to live, or how their healthcare system means medical bankruptcy is not a thing, seems like it would be possible to have a reasonable discussion about. If the US is no longer a place where a TV show host can no longer make fun of the President or else his show gets canceled, is it really that far off from China's handling of Pooh bear memes and Xi?
Finally something by the economist that isnt "America great, EU doomed, America, murica, capitalism yay".
Didnt know Qatar scored so high on GDP per hours worked metric, but I guess they dont measure hours worked in construction as that one is largely immigrants working in unsafe conditions with confiscated passports. Source - the book Inside Qatar.
On a more basic measure, you could just look at whether there are people willing to risk life and limb in order to get into your country instead of getting out...
That's measuring desirability--or at least immediate desirability, which is sometimes related but distinct from wealth.
It also quickly becomes meaningless as people risking life and limb tend to flee to the nearest stable country. For example, Syrian refugees for the most part tended to stay close to their home country with the majority fleeing to nearby Turkey, Lebanon, Jordan, and Iraq--or, moving elsewhere within Syria.
Measuring wealth of a country by measuring how many refugees it takes in is like projecting future revenue/success of a convenience store by measuring how many people come into the store during an active-shooter situation.
Going by your metric, it would suggest that a Pole is wealthier than a Brit because Poland has nearly 1 million Ukrainian refugees to the UK's .25 mil.
Crossing the Mexico US border illegally nowadays involves a multi-day hike through the desert and is extremely dangerous. I’m not sure if it’s as dangerous as crossing the Mediterranean on a smuggler boat, but many people do die making the trek from Mexico to the US.
Canada’s GDP is awesome as long as you include real estate, but selling the same set of houses back and forth with ever increasing prices doesn’t really improve the lives of anyone
Yup. Stats would look even worse if the economist used income instead of GDP per capita. The difference between the numbers is larger for Canada than, say, France or Germany.
Canadians will still insist we're the richest country in the world though. The propaganda here is wild in that it's super subtle but everyone will insist things are great even in the face of overwhelming evidence.
Edit - lol and here come the down votes, even in the face of actual evidence in the article.
I agree with you. There seems to be a wave of mass delusion coursing through Canada. The average person seems to think that high immigration demand is a measure of the country's wealth and status. In actuality, it reflects the depth and scope of our increasingly unaffordable safety net. For instance, if free health care was not available, many immigrants would think twice about moving to Canada.
I love how a publication called "The Economist" doesn't have the wherewithal to measure supposedly economic outliers like Ireland and Luxembourg and just throws its hands up in the air and doesn't try.
