Bofferbrauer2 said:
Ever heard of the Big Mac index? That one started completely as a joke - until someone remarked that it's actually a pretty valid way to calculate people's purchasing power parity, even though it has it's limitations (a Big Mac is pretty cheap in industrialized countries, but in third world countries that's sometimes a whole day's pay, even with the lower prices there). So yeah, GDP (per capita) and PPP (Purchasing Power Parity, also per capita) are the best ones we have right now. Even though they are inherently flawed, they are less flawed than the alternatives. |
Yeah, Big Mac index is a simpler way to gauge Purchasing Power Warity, but the idea is still based on money. For instance a natural catastrophe - say a storm or so - destroys stuff. In rebuilding it the economy burns through more money and therefore GDP increases. But in reality the result of the economy are less values, the money into replacing the destroyed values. On the flipside: if someone works without getting money (say a volunteer activist for maybe helping the poor), this work creates values, but isn't reflected in the GDP - with or without applying the Big Mac index or PPP. Sure comparisons between countries are better with PPP, but this doesn't solve the inherent problem with using money to measure economic value.
But as I wrote, this is still the best measurement we have at all.