Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
It's PPP dollars, hence that difference is taken care of.

PPP is a normalization to purchasing power, and an imperfect one at that. What is relevant in terms of poverty is subsistence costs and PPP is largely meaningless in that respect.

From Wikipedia:

The purchasing power parity (PPP) theory was developed by Gustav Cassel in 1920. It is the method of using the long-run equilibrium exchange rate of two currencies to equalize the currencies' purchasing power. It is based on the law of one price, the idea that, in an efficient market, identical goods must have only one price.

See, there are two problems with using PPP to normalize for subsistence costs. 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. Subsistence depends mainly on shelter, food and water. Of those three, only food is globally tradeable on any kind of industrial scale, and even then, if you believe that the global food market behaves according to the normal rules of market economics, I've got some Enron shares I think you should have a look at.

Second, there does exist a global market for such things as cars, flat-screen TVs and computers, although even there, the assumption of a single price is somewhat suspect). Which means that PPP is going to normalize to the cost of flat-screens rather than food.

To put it in simple terms, 1000 US$PPP may buy me the same amount of cell phones or computers anywhere in the world (give or take ten percent), but it will manifestly not buy me the same amount of calories or vitamin A anywhere in the world.

I'm a charitable kind of guy, so I'll chalk this error up to simple ignorance rather than outright mendacity. Others might be less kind, especially as you yourself so flippantly accuse many of us of lying.

Oh, and next time, do your homework yourself.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Oct 24th, 2007 at 07:14:36 PM EST
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