Calculating Purchasing Power Parity is easy (but doing it well is difficult)

Many economic statistics seem conceptually simple, but are rather intricate and technical as actually measured (or more accurately, constructed). You can’t just line up dollars of GDP and count them. Price indices are similarly fiendish.

Conceptually, the purchasing power parity exchange rate between two countries is simply the relative cost, in local currency units, of buying the same basket of goods in each country. This can be very different from the market exchange rate, but is generally a better way to convert, say, GDP per capita, if you’re interested in cross-country comparisons of welfare (GDP? welfare? we’re already on shaky ground…)

Last week another Australian I know in DC was surprised to see that the International Comparison Program’s (ICP) 2015 PPP exchange rate for Australia is 1.487. Are things really 50% more “expensive” (dollar for dollar) in Australia, he wondered?



“They used a pencil”: technology adoption in different countries

I now live in the United States, and amongst the differences from the otherwise-similar places I’ve lived before, Australia and the UK, is the adoption of domestic technologies here. The contrast between America and the UK seems greatest, with Australia – like in so many respects – sitting somewhere in between.

Americans living in Britain famously bemoan the lack of mixer taps on bathroom sinks, forcing one to choose between freezing and scalding, or mix the two in the basin. But it goes well beyond this. Based on my experiences so far, certain amenities seem to be more or less standard in medium-grade-and-above housing in America: dishwashers, garbage disposal units and air-conditioning being three particular examples. (more…)