PPP Exchange rate is the theoretical exchange rate you should have if each currency would give you the same amount of money.
I think JakeSs main misunderstanding comes here:
First, for most of the goods involved in subsistence, there is no global market, hence the assumption of equal prices is simply (and patently) false.
Sure. But that doesn't matter, since the point here is not saying what the exchange rates between two currencies should be, but the point is to convert the daily income into something that is comparable. And for that, PPP works just fine.
This is of course not perfect, but it's way better than just using currency exchange rates when measuring poverty.
I'll even admit that I flew off the handle a bit from being accused of dishonesty. That tends to piss me off. Nevertheless, I do not think that it would be wise of you to attempt to turn this into a discussion of who has been most polite in this thread. DoDo and linca would win that contest hands down.
Nevertheless, it is still true that PPP$ do not accurately reflect subsistence costs, which is the thrust of my original point, as the PPP normalisation includes many goods and services that are not necessary to subsistence.
It is, of course, possible to construct an appropriate normalisation, but that's not what's being done with the official numbers.
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
Thus, being able to afford a train ride in a poor country based on subsistence farming is not a major problem (at least compared to all the other problems subsistence farmers face), while in a society where the economic structure is based on thirty-km commutes each way, each day, inability to afford a train ticket is A Bad Thing. Precisely the same good. Wildly differing degrees of necessity.
I accuse you who perpetuate this argument of having been suckered. :-)
People are NOT rich because they starve to death together.
Sure, but it's the best option we have until somebody actually make a PPP index that is done only to measure poverty. And to be quite honest, regarding how cheap subsistence goods like somewhere to live and food is in the US, I seriously doubt that the US is gonna come out any worse in the comparison...
