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?



Growth slowdown (2): GDP is a measure of a mid-20th century industrial economy

(Back to the overview post)

The invention of modern national accounting, which includes the construction of GDP estimates, is credited to Kuznets and others, who did pioneering work on measuring output in the 1930s and 1940s. Ever since it was invented, thoughtful economists have cautioned against using GDP as a measure of welfare; all the while most other economists do just that.The standard criticisms of national output are outlined in clarity by the Stiglitz-Sen-Fitoussi commission, or more poetically by Robert Kennedy:


I would express these specific criticisms in a common way:

GDP measures the things that seemed important in 1940.


Female convenors invite more female speakers (or do they?)

Women are underrepresented in most academic fields, including my own (economics), and especially at higher levels. People are always trying to find simple interventions to improve the situation. According to a new study in the microbiology journal mbio (reported somewhat breathlessly in the Atlantic) one such intervention is to ensure that women are amongst the organisers. This is argued to increase the probability of inviting female speakers (a worthy intermediate goal) which, they argue, will advance women in academia generally (the end goal):

“Put at least one woman on the team that organizes a scientific symposium, and that team will be much more likely to invite female speakers,” said study co-author Arturo Casadevall, M.D., Ph.D., professor and chair of microbiology & immunology at Einstein, director of the College of Medicine’s Center for Immunological Sciences, and attending physician at Montefiore Medical Center, the University Hospital for Einstein.

[from the press release]