Paul - I would be interested reading the article. I work on climate change policy, and PPP-adjusted income figures are one of the indices used for comparison of development levels in the context of obligations to reduce GHG emissions. (we use them ourselves, absent anything better for our purposes.)
--pb
In July/August we had a discussion on pen-l about the use (or mis-use) of PPP (so called Purchasing Power Parity exchange rates). The World Bank, the IMF and many others increasingly use PPP to re-calculate GDP figures and then present those numbers for the purpose of international comparisons. I pointed out various reasons to believe that the PPP method has 'biases' that may automatically show progress in many parts of the "3rd world" (reducing poverty, closing the gap with the "developed" world) even if nothing in the "3rd world" had actually changed. (And that there may also be biases in making US\European-Japanese comparisons). These days much mainstream work uses these recalculated GDP numbers, usually to support neo-liberal policies, often without clear acknowledgment that they are not true statistics - just numbers from a model with many questionable and biased assumptions. One must carefully examine almost any international comparison apparently using statistics to see whether they are actually PPP numbers.
I attributed this to a number of inherent flaws in a PPP type approach: it assumes a neo-classical general equilibrium model and the law of one price. It also assumes that there are no inherent differences between "tradable" and "non-tradable" goods. There are also a number of inherent technical problems (the appropriate choice of a universal basket of goods; the use of an EKS index; the WB makes comparisons in time using different PPP baskets; etc).
To my knowledge there is a real shortage of material written on this (principally Reddy and Pogge's papers on their website dedicated to this: http://www.socialanalysis.org (from the Institute for Social Analysis at Columbia U.). There is even a shortage of material written from a non-neoclassical perspective about international trade and PPP (principally the work of Anwar Shaikh at the New School).
Now there is a new article in the current (2004) annual edition of Contributions to Political Economy. It is by a Mexican economist (at UNAM) called Pablo Ruiz-Napoles and is entitled The PPP Theory and Ricardo's Theory of Value. To me, in the context of the use of PPP in GDP statistics, the issue is not so much what one thinks exactly of this form of Ricardian price formation - rather the article illustrates how much the PPP theory depends on neo-classical theory and hence produces "statistics" that affirm neo-liberal policies.
Anyone interested in a e-copy of the article can contact me off list. (Incidentally, I see this same fellow also has 2 recent articles in issues of the JPKE: one criticizing neo-liberal policies in Mexico, and one in Latin America overall.)
Paul
