Re: HDI, GNP and the PPP factor
Michael wrote: Economics is all about measuring in measurable. I was reading this week about scientific racism in Victorian England, where people tried to develop mathematical measures of how close various peoples came to being Africans. These measures showed the Irish were almost Black. Such matters were taken very seriously and the time. The English tried very hard to make the Irish, umm, English, but the English in Ireland just kept on becoming Irish no matter what they did -- until, of course, the Elizabethans. Oppression of the Irish people really accelerated with the Elizabethans, and by the time the Victorians rolled around, the oppression was well established. Throughout the history of Ireland, invader after invader came and eventually absorbed themselves into the native population of Ireland. They ALL became Irish. First it was the Celts who were actually very friendly invaders from the beginning. Then the Vikings came, less friendly at first but eventually joined the Celts and became Irish. The last of the more hostile Normans, came, fought, conquered, and then became Irish. The Anglos (Old English) also adopted Gaelic practices until the Tudors and specifically the Elizabethans began to give landed titles in Ireland in exchange for the abandonment of Gaelic governing customs and culture. The Elizabethans also established presidencies for crying out loud in Connaught and Munster -- something like Wales. But the worst and most detrimental practice to the Irish was an ethnic cleansing style colonization in Ulster and Munster. Diane Kathleen O'Ciardha Monaco :)
Re: HDI, GNP and the PPP factor
Paul wrote: BUT, using the PPP technique I described in earlier posts, the World Bank also calculates an imputed (imaginary) GNI. For the same group of countries this calculation boosts their Gross National Income from $6.1 to $20.5 trillion! This is a 320% increase - but just on paper Relative prices in different parts of the world would have to be considered to obtain a fair picture of relative incomes. I can buy a banana for 3 cents in my city (Pop. 15 million). How much a banana costs in New York? Ulhas Yahoo! India Careers: Over 65,000 jobs online Go to: http://yahoo.naukri.com/
Re: HDI, GNP and the PPP factor
Relative prices in different parts of the world would have to be considered to obtain a fair picture of relative incomes. I can buy a banana for 3 cents in my city (Pop. 15 million). How much a banana costs in New York? Ulhas They are about $1 a kilo in Moscow (not exactly banana-growing country). __ Do you Yahoo!? Yahoo! Mail - 50x more storage than other providers! http://promotions.yahoo.com/new_mail
Re: HDI, GNP and the PPP factor
5 for a depreciated dollar on street corners in lower Manhattan. - Original Message - I can buy a banana for 3 cents in my city (Pop. 15 million). How much a banana costs in New York? Ulhas
Re: HDI, GNP and the PPP factor
Michael and Yoshie write: Yoshie, you are not the only one that has been pestering Paul. Michael Perelman Paul, why don't you put together your notes on the PPP factor that you've posted here and publish it as an article for the general audience? -- Yoshie Many thanks, the encouragement is much much appreciated. Paul
Re: HDI, GNP and the PPP factor
Ulhas Joglekar writes: Relative prices in different parts of the world would have to be considered to obtain a fair picture of relative incomes. I can buy a banana for 3 cents in my city (Pop. 15 million). How much a banana costs in New York? Thanks for bringing this up. Hold in your mind your point that you are looking for a fair picture of relative incomes between NY and India - this is a key assumption. One might make a very rough comparison of the price of bananas in say Mumbai (I assume?) vs. Manhattan. It is rough partly because as (people have heard via the WTO complaint) the bananas are quite different. The large, tough skinned ones in NY have no taste but were chosen for commercial reasons by the US fruit companies for their US market. These companies enjoy a US monopoly and protectionism has kept out the more tasty ones not grown in Central America by US companies. Over time the protectionism has now created all sorts of non-tariff, non-quota barriers such as shipping\marketing facilities and consumer preferences against the thin skinned but much more tasty bananas (hysterisis, akin to the QWERTY keyboard issue). So a comparison that includes price and quality will not be easy (there is no truly free market) but lets assume, like the neo-classical economists, that the market is so powerful that it will get us close enough. As you know bananas are considered tradable but how to handle non-tradables? Forgive a North American detour for a second. If I try to compare Manhattan with Alabama (poor, more rural south of US), how will I compare the cost of a night at the Opera in Alabama (requires a jet plane) or dining at a fine Japanese restaurant (driving a few hundred miles)? Conversely, how will I compare the cost in Manhattan of setting up a good woodworking shop in my car garage (no garages in crowded Manhattan) or a small backyard pool for the kids (health clubs are not the same)? The different endowments create different possibilities which get locked into different lifestyles and consumer preferences. [Please excuse the silly stereotypes.] And there is no reason to assume that the differences are exactly symmetrical, so it will matter greatly whether I compare NY in Alabama terms or visa-versa (nor will it suffice to do both and then split an asymmetrical difference which would be mathematically impractical for 200 countries anyway). But some reasonable people do press on with the exercise because (one hopes) between NY and Alabama there are more things in common than otherwise: there is free trade, many goods are common, if the price of labour in Alabama gets too low people maybe enough people can migrate to NY to even things out (and visa-versa if the cost of living in NY gets too high). And there is an important practical point: these cost of living calculations are needed to run an national system that has to allocate salaries, benefits, government grants, etc. Now we come to Mumbai - and then on to an Indian village. There is no longer anything like free trade with Manhattan and certainly no free migration. The non-tradables vastly outweigh the (theoretically) tradable. And the effects of history and of differences in available choices balloon into something that could not be called lifestyle. We are no longer comparing bananas and bananas ...but apples and oranges. To solve this dilemma the PPP is deployed. A basket is determined (inherently arbitrary and biased with asymmetries since, as discussed the different groups choose not to consume the same things). The basket has only the few banana-like tradables (which we have seen are not truly tradable, but this is waived off as market imperfections) and the price ratio of this small group is arbitrarily applied to the non-tradables and to labour which not only can't legally immigrate, but couldn't even physically fit in Manhattan. This exercise also imagines that countries can buy imports and pay debts with the imagined adjusted income. This is truly the statistical tail wagging the statistical dog. BUT NOW come back to the original purpose of this contorted exercise: to compare relative incomes NY/India. Maybe (or maybe not) this is a useful exercise since it is inherently talking of apples and oranges. And maybe or maybe not this exercise should be tried through a statistic like the National Accounts which measures something else entirely (the market economy) and leaves out things like non-market income. It could also be tried with several direct measures of life like longevity, nutrition, education. But - in any event - such an international comparison is NOT the purpose to which the exercise is put to use. Instead, these contrived and imaginary numbers ARE used to try to convince Indians that they are better off in INDIAN terms. The PPP numbers ARE used to show that neo-liberal policies in India would be better for India. If such an absurd mis-application of a contrived statistic were used against the
Re: HDI, GNP and the PPP factor
Paul wrote: The PPP numbers ARE used to show that neo-liberal policies in India would be better for India. I don't know what you mean neo-liberal, but nobody is using _PPP numbers_ in India to support neo-liberal policies. Nor anybody in India is opposing _PPP numbers_ to justify Marxists or fascist policies. Btw, the Human Development Report for India is prepared by India's Planning Commission. What WB has to do with it? Ulhas Yahoo! India Careers: Over 65,000 jobs online Go to: http://yahoo.naukri.com/
Re: HDI, GNP and the PPP factor
Economics is all about measuring in measurable. I was reading this week about scientific racism in Victorian England, where people tried to develop mathematical measures of how close various peoples came to being Africans. These measures showed the Irish were almost Black. Such matters were taken very seriously and the time. If we were gone to try to make some sort of quantitative measure of a human development index, I think I will try to get a handle on how people at the bottom fared rather than looking at averages. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu
Re: HDI, GNP and the PPP factor
Speaking of scientific racism, ever read Chase's Legacy of Malthus? Best work on it, I think. - Original Message - From: Michael Perelman [EMAIL PROTECTED] To: [EMAIL PROTECTED] Sent: Sunday, July 25, 2004 10:01 AM Subject: Re: [PEN-L] HDI, GNP and the PPP factor Economics is all about measuring in measurable. I was reading this week about scientific racism in Victorian England, where people tried to develop mathematical measures of how close various peoples came to being Africans. These measures showed the Irish were almost Black. Such matters were taken very seriously and the time. If we were gone to try to make some sort of quantitative measure of a human development index, I think I will try to get a handle on how people at the bottom fared rather than looking at averages. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu
Re: HDI, GNP and the PPP factor
Ulhas writes: I don't know what you mean neo-liberal, but nobody is using _PPP numbers_ in India to support neo-liberal policies. It is buried in the statistics they (the neo-liberal proponents) use. For example, on Thursday you helpfully posted the Financial Express's article on the statement from the Government releasing the HDI statistics. The first line (quoted from your post) reads: India's human development index (HDI) has shown a steady improvement in the last couple of years. India's ranking, however, at 127 out of 177 countries remains the same as in the previous year... Well, this HDI, that has shown steady improvement in the last couple of years is partly based on the PPP version of India's GNI (and only that version is presented). What the Government should really have to answer for is why - after decades of significant improvement - the infant mortality rate and the under-five mortality rate have NOT improved in the last couple of years. For reasons I explained earlier, these are much more illustrative statistics when it comes to human development. In fact there were almost 2.5 million child deaths EACH year. According to UN and Government of India-agreed estimates the vast majority of these deaths could have been prevented and were unnecessary - if these poor children had been given a small fraction of the political commitment shown the business community. BTW, I would *guess* that for the pro-neo liberals virtually every GDP\GNI statistic in the India vs. China debate uses the PPP version. Btw, the Human Development Report for India is prepared by India's Planning Commission. What WB has to do with it? Ulhas Yes the last Report was 2001 (publ. 2002) and prepared by the IPC, funded by the UNDP. The various Indian state reports (worth looking at, see http://hdr.undp.org/reports/view_reports.cfm?country=INDcountryname=INDIA%20 ) were prepared by the state governments and funded by UNDP. These reports are different than the global Human Development Report which publishes the global HDI and is published exclusively by UNDP itself. The press report you posted referred to the global UNDP report. It prepares the HDI based on the data received from the World Bank (for national accounts). Paul
Re: HDI, GNP and the PPP factor
Paul wrote: It is buried in the statistics they (the neo-liberal proponents) use. I was making a simple point that the debate on economic policy in India has little to do the utility of PPP numbers. Paul was trying to show how PPP numbers overstate the economic growth in the developing countries. I am not sure I understand how he has reached that conclusion. Ulhas Yahoo! India Careers: Over 65,000 jobs online Go to: http://yahoo.naukri.com/
Re: HDI, GNP and the PPP factor
Ulhas Joglekar wrote: I was making a simple point that the debate on economic policy in India has little to do the utility of PPP numbers. But apparently _our_ understanding of that growth has much to do with those PPP numbers. Your post on growth in India incorporated those numbers, and we in the U.S. might not understand your post without Paul's explanation of what those numbers meant. Paul was trying to show how PPP numbers overstate the economic growth in the developing countries. I am not sure I understand how he has reached that conclusion. Paul suggests (or this is what I get from his posts) that the proper way to estimate a nation's economic growth is to measure the well-being of (say) the worst-off 20% of its population. How does the infant mortality rate of that part of the Indian population compare to the infant mortality rate of that part of the French or German or U.S. populations? Without such comparisons, not of statistical creations but of actual lives, we can't judge _real_ economic growth, which in material terms can only mean the economic improvement of those who are worst off. There are some passages in Charles Dickens's novel, _Hard Times_, which bring this out very dramatically. Similarly, in measuring the present economy in the U.S., we should not look at the unemployment rates or the average GNP per capita but examine the life conditions of the worst-off 20% of the u.s. population. And as I drive through the west side of Bloomington Illinois on a summer day, the quality of life of that segment of the population does not look very good. Is that (lower 20%) of the population of India (measured by infant mortality, available medical care, etc.) worse or better off than those neighborhoods in west Bloomington? Carrol Ulhas Yahoo! India Careers: Over 65,000 jobs online Go to: http://yahoo.naukri.com/
Re: HDI, GNP and the PPP factor
On measuring the unmeasurable, 3.5 centuries ago, Sir William Petty, was devising ways to measure the economy. I wonder how silly we will look in the future, unless we continue to destroy the future. Routh, Guy. 1977. The Origin of Economic Ideas (New York: Vintage). 45: In comparing wealth of Holland and Zealand, he takes 2 guesses by 2 other people, doesn't like the result and so uses his own guess. He estimates the population of France from a book that says that it has 27,000 parishes and another that says that it would be extraordinary if a parish had 600 people. He estimates 500 people per parish and a population of 13.5 million. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu
HDI, GNP and the PPP factor
Louis had expressed some belief that official statistics may have biases and there has been an ongoing discussion of the Human Development Index. So, I thought I should look up the numbers for the impact of the PPP effect alone. For the 130 or so countries listed as Low and Middle Income the World Bank calculates a Gross National Income (GNI, formerly called Gross National Product, GNP) of $6.1 trillion in 2002. This is using the Bank's own version of the standard National Accounts technique, similar to the U.S. government, and uses a 3 year average of exchange rates adjusted for inflation using the country's GDP deflator to convert to the US Dollar. BUT, using the PPP technique I described in earlier posts, the World Bank also calculates an imputed (imaginary) GNI. For the same group of countries this calculation boosts their Gross National Income from $6.1 to $20.5 trillion! This is a 320% increase - but just on paper and of course to buy imports, pay debts, etc nothing has improved, although the World Bank calls its international PPP conversion factor the International Dollar. [see http://www.worldbank.org/data/wdi2004/tables/table1-1.pdf for the data]. This PPP version doesn't just inflate National Income it also has statistical biases that show economic progress over time (even if there had been none) and show neo-liberal policies as successful (even they have produced no improvement). Only 6 years earlier the standard version of GNI showed the Low and Middle Income as having almost the same GNI - $5.7 trillion. The PPP version for that year showed a GNI of $15.1 So, in just 6 years the PPP conversion has gone from increasing stated output by 260% to increasing stated output by 320%. [See the World Bank World Development Indicators 1998 for the comparison] The PPP conversion factor does not seriously inflate the GNI within the High Income group (in fact many years it shrinks the GNI of Europeans and Japanese vis-a-vis the US) so, using the PPP version of National Income purports to show great progress in 'closing the gap' between rich and poor countries. Combined with the PPP-linked World Bank poverty measurement, great progress is shown to have been made in reducing the absolute numbers of the poor [http://www.worldbank.org/data/wdi2004/Section1-intro.pdf]. Indeed, it has been a little noticed trend that today most of the World Bank's 'public relations' type documents, most human development related documents, and most documents arguing for the success of the neo-liberal project use PPP *and only* PPP. Even where there findings would be utterly reversed by the once standard method. Even the introductory chapter to the World Bank's flagship statistical publication (cited above) uses ONLY the more favorable (and yet artificially constructed) version. Even the Human Development Index we have been discussing presents ONLY one version - and this radically changes many stated conclusions. It is not, as if the actual National Income Accounts are not used in other environments where that method would be more favorable to the Bank or the IMF's policy objectives. Indeed in some cases - such as those involving debt negotiations, foreign investment, or sectoral policies promoting the private sector, it appears (by purely casual observation) that *only* the non-PPP version appears. Paul
Re: HDI, GNP and the PPP factor
Indeed, it has been a little noticed trend that today most of the World Bank's 'public relations' type documents, most human development related documents, and most documents arguing for the success of the neo-liberal project use PPP *and only* PPP. Even where there findings would be utterly reversed by the once standard method. Even the introductory chapter to the World Bank's flagship statistical publication (cited above) uses ONLY the more favorable (and yet artificially constructed) version. Even the Human Development Index we have been discussing presents ONLY one version - and this radically changes many stated conclusions. It is not, as if the actual National Income Accounts are not used in other environments where that method would be more favorable to the Bank or the IMF's policy objectives. Indeed in some cases - such as those involving debt negotiations, foreign investment, or sectoral policies promoting the private sector, it appears (by purely casual observation) that *only* the non-PPP version appears. Paul Paul, why don't you put together your notes on the PPP factor that you've posted here and publish it as an article for the general audience? -- Yoshie * Critical Montages: http://montages.blogspot.com/ * Greens for Nader: http://greensfornader.net/ * Bring Them Home Now! http://www.bringthemhomenow.org/ * Calendars of Events in Columbus: http://sif.org.ohio-state.edu/calendar.html, http://www.freepress.org/calendar.php, http://www.cpanews.org/ * Student International Forum: http://sif.org.ohio-state.edu/ * Committee for Justice in Palestine: http://www.osudivest.org/ * Al-Awda-Ohio: http://groups.yahoo.com/group/Al-Awda-Ohio * Solidarity: http://www.solidarity-us.org/
Re: HDI, GNP and the PPP factor
Yoshie, you are not the only one that has been pestering Paul. Michael Perelman Economics Department California State University Chico, CA 95929 -Original Message- From: PEN-L list [mailto:[EMAIL PROTECTED] On Behalf Of Yoshie Furuhashi Sent: Saturday, July 24, 2004 7:33 PM To: [EMAIL PROTECTED] Subject: Re: [PEN-L] HDI, GNP and the PPP factor Indeed, it has been a little noticed trend that today most of the World Bank's 'public relations' type documents, most human development related documents, and most documents arguing for the success of the neo-liberal project use PPP *and only* PPP. Even where there findings would be utterly reversed by the once standard method. Even the introductory chapter to the World Bank's flagship statistical publication (cited above) uses ONLY the more favorable (and yet artificially constructed) version. Even the Human Development Index we have been discussing presents ONLY one version - and this radically changes many stated conclusions. It is not, as if the actual National Income Accounts are not used in other environments where that method would be more favorable to the Bank or the IMF's policy objectives. Indeed in some cases - such as those involving debt negotiations, foreign investment, or sectoral policies promoting the private sector, it appears (by purely casual observation) that *only* the non-PPP version appears. Paul Paul, why don't you put together your notes on the PPP factor that you've posted here and publish it as an article for the general audience? -- Yoshie * Critical Montages: http://montages.blogspot.com/ * Greens for Nader: http://greensfornader.net/ * Bring Them Home Now! http://www.bringthemhomenow.org/ * Calendars of Events in Columbus: http://sif.org.ohio-state.edu/calendar.html, http://www.freepress.org/calendar.php, http://www.cpanews.org/ * Student International Forum: http://sif.org.ohio-state.edu/ * Committee for Justice in Palestine: http://www.osudivest.org/ * Al-Awda-Ohio: http://groups.yahoo.com/group/Al-Awda-Ohio * Solidarity: http://www.solidarity-us.org/
