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Old December 11th, 2016, 11:15 PM   #41
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I don't entirely disagree with you but I can't imagine what budget you think people have where manufactured goods are such a large portion.

The value proposition you state may well be true as inferior goods are less preferred BUT still purchased due to price and availability. Huawei mobile phones might be inferior to iPhones but still consumers purchase and use them in the tens of millions to accomplish most of the same tasks as users of iPhones. Just because a good is inferior doesn't necessarily mean quality of life populated by inferior goods is also inferior because an inferior good isn't necessarily inferior due to function but often due to marketing preferences or VERY small functional differences where 90% of the functions are the same and the remaining 10% might be used by consumers less than 10% of the time they are making use of the product.

There is the common example in measuring inflation where the basket of goods includes electronics which advance in capability every year while their prices decrease relative to that capability. Should a TV bought this year be valued less than the TV bought 3 years prior even though having 4" larger screen and more advanced features BUT costing less?

Using less extreme examples you can make similar arguments about durable goods frequently included in the cost of houses both in the equipment to build the house and the appliances in those houses.

Then there is the problem of market pricing... some markets like pharmaceuticals have extreme distortions but many goods DO have different price points in different markets even without taking into account taxes.

Vehicles are priced fairly evenly due to competition compared to some other goods but how do you compare a motorcycle in Vietnam to one in Italy? The Vietnamese driving the motorcycle in Vietnam might not be having as good of an experience as the Italian riding in Tuscany but functionally they can accomplish the same things so from PPP perspective the quality of life is going to be roughly similar despite the Italian motorcycle costing 10x as much.

As for housing... there are some examples that support your position but many that do not. I used to live in Texas and for 200,000 USD in many parts of Texas you can get a ranch style house of 15,000 ft area. Not that far away in Phoenix that same house would be 300,000 USD and in Denver which has a hot housing market that is a half million USD home. Your argument essentially is saying the house in Denver IS more than twice as nice as the house in Texas despite both houses being located near communities with similar avg incomes and amenities. Just that Denver has a slightly different climate and legal marijuana laws along with more educated workforce in a wider area (Austin, Houston, some areas in Texas match Denver but overall Texas doesn't yet even in Texas communities matching Denver housing prices are lower).
You are right but my point is that you have access to the same cheaper options in most countries

You can buy a cheap phone in the US (instead of an i phone) , you can buy a cheap run down motorbike in Italy, you can buy a very cheap house in the US or France etc....

Therefore artificially multiplying the GDP of some country because people have access to (or in many cases can only afford) cheaper goods does not make sense.... People in a richer country also have access to cheaper goods BUT in many cases they ALSO have access to (can afford) more expensive (hopefully better quality) goods...
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Old December 11th, 2016, 11:51 PM   #42

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You are right but my point is that you have access to the same cheaper options in most countries

You can buy a cheap phone in the US (instead of an i phone) , you can buy a cheap run down motorbike in Italy, you can buy a very cheap house in the US or France etc....

Therefore artificially multiplying the GDP of some country because people have access to (or in many cases can only afford) cheaper goods does not make sense.... People in a richer country also have access to cheaper goods BUT in many cases they ALSO have access to (can afford) more expensive (hopefully better quality) goods...
It is all about pecuniary policies here!
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Old December 12th, 2016, 02:54 AM   #43
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What alot of people seem to willfully forget about Reagan is that while he adjusted tax brackets and did several other changes in taxes lowering taxes overall when he came into office, due to the explosive growth of the federal debt by the time Reagan left office he had raised taxes again to a point higher than the previous administration (or current taxes!) and the debt still was growing... then his former Vice President raised taxes again due to debt growth handing the White House to Clinton who initially raised taxes then ended up cutting several taxes particularly capital gains so that by the end of Clinton administration overall taxes were lower than under Reagan despite Clinton raising income tax rates on the highest brackets.

What all this means is that not all modest tax increases have large negative effects on the economy and certain types of taxes are more important for economic growth than others and most importantly that economists still don't understand large economies let alone global economies since the business cycle operates on its own speed with taxes and regulation mostly enhancing or flattening the curves but not initiating the business cycle.
I wouldn't disagree with too much of this. I certainly agree with much of your final paragraph. I suspect economies can temporarily put up with too much tax and too much regulation. But in the medium to long term it stifles economic growth.

I had understood that Reagan cut taxes massively when he came into office, but had been forced/pressured into withdrawing many of these tax cuts later in his Presidency. But that taxes were still generally lower when he left office. I could be wrong with that assumption. Still, even if taxes were increased I think that at the very least Reagan attempted to halt the mission creep of ever increasing taxes and regulation; a mission creep that has continued throughout much of the Western world before and after Reagan.
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Old December 12th, 2016, 04:01 AM   #44

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Second I am not sure that life is better in Sweden than in China
Trust me, life of an average Swede is so much better than the life of an average Chinese, this is not even a matter of debate.
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Old December 12th, 2016, 06:08 AM   #45
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Trust me, life of an average Swede is so much better than the life of an average Chinese, this is not even a matter of debate.
Average maybe.... but then it all depends what your values are....

I know people who hold passports from 2 countries, an EU country and one which is much poorer (and poorer than China)... And guess what, they prefer to live in the poorer country....
Why ? It includes things like better weather, more interesting things to do , friendlier people, sense of belonging to a community , more freedom, more business opportunities etc...

If you have been to Sweden in winter, you know that life is pretty boring there and the weather is awful....
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Old December 12th, 2016, 07:11 AM   #46

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Average maybe.... but then it all depends what your values are....

I know people who hold passports from 2 countries, an EU country and one which is much poorer (and poorer than China)... And guess what, they prefer to live in the poorer country....
Why ? It includes things like better weather, more interesting things to do , friendlier people, sense of belonging to a community , more freedom, more business opportunities etc...

If you have been to Sweden in winter, you know that life is pretty boring there and the weather is awful....
Sweden in the summer is amazing but I could see the winter being a bit of a bummer.

What I've noticed is alot of my friends who originally came from outside the U.S. do is send money home or return and buy nicer homes in their former countries than they could afford before they came to the U.S. but still spend most of their time in the U.S. and buy the more expensive goods postponing retirement even to afford higher material lifestyle. I do have a couple friends who saved more and retired early and now spend most of their time in their birth nation and they seem far happier to me. Still happiness is a very subjective judgement that people aren't always honest with themselves about.

PPP is only about purchasing power for similar goods- not equal goods though there is the Big Mac index and such that try to find exactly equal goods but that is very difficult! So while someone might prefer a Mercedes to a Nissan they can afford the Nissan and many other similar inferior goods with lower overall incomes, pay far less for medical care, services, food, etc and while they might pay more for imported goods there is a range of choices at different price levels even before comparing exchange rates and values of same good in different counties (minus taxes).

U.S. is multiple times more GDP per capita than Mexico yet because Mexican's pay far less for many things they are in fact not quite as poor living standards as the pure comparison on income would make out. Sure Mexican's are still lower living standards than U.S. but PPP comparisons simply make case that there is more to standard of living than only income and give a small basis for some comparison in monetary sense (not social or cultural).
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Old December 12th, 2016, 07:32 AM   #47
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Sweden in the summer is amazing but I could see the winter being a bit of a bummer.

What I've noticed is alot of my friends who originally came from outside the U.S. do is send money home or return and buy nicer homes in their former countries than they could afford before they came to the U.S. but still spend most of their time in the U.S. and buy the more expensive goods postponing retirement even to afford higher material lifestyle. I do have a couple friends who saved more and retired early and now spend most of their time in their birth nation and they seem far happier to me. Still happiness is a very subjective judgement that people aren't always honest with themselves about.

PPP is only about purchasing power for similar goods- not equal goods though there is the Big Mac index and such that try to find exactly equal goods but that is very difficult! So while someone might prefer a Mercedes to a Nissan they can afford the Nissan and many other similar inferior goods with lower overall incomes, pay far less for medical care, services, food, etc and while they might pay more for imported goods there is a range of choices at different price levels even before comparing exchange rates and values of same good in different counties (minus taxes).

U.S. is multiple times more GDP per capita than Mexico yet because Mexican's pay far less for many things they are in fact not quite as poor living standards as the pure comparison on income would make out. Sure Mexican's are still lower living standards than U.S. but PPP comparisons simply make case that there is more to standard of living than only income and give a small basis for some comparison in monetary sense (not social or cultural).
The thing is you cannot take PPP money to the store...

As for Mexico, I think the migration flows speak for themselves...
The PPP multiplier for Mexico is 1.6..... Try getting americans making $100K to move to Mexico with an $80K salary ($128K PPP... see if they believe they are getting a 28% increase... goood luck)...

"similar goods" is where what looks like a nice theory breaks down... A 10$ phone is "similar" to a $600 i phone.. In a richer country people will buy the i phone because they can... in a poorer country they'll go for the $10 one... It would be silly to award a 60 PPP multiplier because of that....

Again the only things that are cheaper in poorer countires are locally grown food and some services...... the rest is either at par, or even more expensive that in richer countries....
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Old December 12th, 2016, 09:56 AM   #48

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Average maybe.... but then it all depends what your values are....

I know people who hold passports from 2 countries, an EU country and one which is much poorer (and poorer than China)... And guess what, they prefer to live in the poorer country....
Why ? It includes things like better weather, more interesting things to do , friendlier people, sense of belonging to a community , more freedom, more business opportunities etc...

If you have been to Sweden in winter, you know that life is pretty boring there and the weather is awful....
In that sense you are right. Of course if you are talking about measurements used in most international indicators to show the value of a country: like GDP per capita, GNI per capita, health expectancy at birth, literacy rates, economic equality, political freedom, human rights and government transparency, Nordic countries and Anglo-Saxon countries will be at the top and African countries at the bottom. That's how the data shows.

Yes, I take into account those hard measurements, but also take into account other things that you mentioned above.

IMO, as a 20-something single male, a country like China would be better for me than a country like Sweden or Denmark. But if I am reaching middle-age and have a family to take care of, I might completely change my opinion.
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Old December 12th, 2016, 08:50 PM   #49

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As for Mexico, I think the migration flows speak for themselves...

The PPP multiplier for Mexico is 1.6..... Try getting americans making $100K to move to Mexico with an $80K salary ($128K PPP... see if they believe they are getting a 28% increase... goood luck)...

"similar goods" is where what looks like a nice theory breaks down... A 10$ phone is "similar" to a $600 i phone.. In a richer country people will buy the i phone because they can... in a poorer country they'll go for the $10 one... It would be silly to award a 60 PPP multiplier because of that....

Again the only things that are cheaper in poorer countires are locally grown food and some services...... the rest is either at par, or even more expensive that in richer countries....
No where does any PPP comparison make Mexico better than the U.S. and since the U.S. is just next door the migrant flows make sense- if anything PPP shows why the migrant flows aren't even larger.

Similar means that a $10 flip phone without touchscreen or much internet capability is not compared to an iPhone but a Huawei knockoff iPhone that looks very similar and behaves similar too (just without Apple store and slower, slightly less good camera/screen etc) but costs $150 instead of $700.

In absolute terms 100k is still better than 80k even if the cost of living is lower which is why people still live in NYC. However you are aware there is around a million U.S. citizens living in Canada and 80,000 more moving there every year which proportionally is higher than the rate of Mexicans moving to the U.S.

https://www.washingtonpost.com/news/...=.995f2d81f8d1

Also obviously there are many other reasons people choose to move or not than economics not to mention people who are basing a move mostly on economic reasons don't even have to move to Mexico when there are places in the U.S. with nearly as cheap cost of living.

Food usually (not all kinds of food but usually most with some exceptions), services, rents, land prices, perishable goods other than food, services like healthcare, actually quite a long list of things.

There are a few items that can be more expensive but rarely due to exchange rates but mostly due to government imposed tariffs or import restrictions.
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Old December 13th, 2016, 02:04 AM   #50
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In absolute terms 100k is still better than 80k even if the cost of living is lower which is why people still live in NYC.
Indeed... That is why I am so dead set against PPP
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