Saturday , March 28 2020
Home / Real-World Economics Review / Cross-country comparisons of wealth

Cross-country comparisons of wealth

Summary:
From Asad Zaman This continues a sequence of posts on how objective looking statistics conceal hidden values, because a positivist approach prohibits open expression and discussion of value judgments. Previous posts in the sequence are: Lies, Damned Lies, and Statistics, Subjectivity Concealed in Index Numbers, and The Values of a Market Society. Countries compete with each other on the GDP numbers, without any awareness of the values which are embodied in such competitions. Such comparisons are fraught with many difficulties. We illustrate the difficulties which arise when we try to compare GDP across nations. To being with, let us examine the GDP data measured in Local Currency Units (LCU) for the countries India, Pakistan, Malaysia, Bangladesh, China and Irland from the World

Topics:
Asad Zaman considers the following as important:

This could be interesting, too:

David F. Ruccio writes Back to work? A modest proposal

Lars Syll writes Econometric modelling as junk science

Dan Crawford writes Open thread March 27, 2020

John Quiggin writes The awful arithmetic of herd immunity

from Asad Zaman

This continues a sequence of posts on how objective looking statistics conceal hidden values, because a positivist approach prohibits open expression and discussion of value judgments. Previous posts in the sequence are: Lies, Damned Lies, and StatisticsSubjectivity Concealed in Index Numbers, and The Values of a Market Society.

Countries compete with each other on the GDP numbers, without any awareness of the values which are embodied in such competitions. Such comparisons are fraught with many difficulties. We illustrate the difficulties which arise when we try to compare GDP across nations. To being with, let us examine the GDP data measured in Local Currency Units (LCU) for the countries India, Pakistan, Malaysia, Bangladesh, China and Irland from the World Development Indicator (WDI) data set of the World Bank[1] which is presented in Table 1. Firstly, look at the column for the year 1970.  The largest GDP is the one for Malaysia which is 13.10 trillion MYR. On the other hand, Irland has the smallest GDP which is 2.26 billion IEP. On this basis, can one say that in 1970 Malaysia had the largest wealth and Irland had the smallest wealth? Well obviously not, because the numbers are not comparable since they are measured in LCU. The currency units are not comparable across countries. We must learn how to translate one local currency unit into another, in order to be able to compare countries according to GDP .  read more

Asad Zaman
Physician executive. All opinions are my personal. It is okay for me to be confused as I’m learning every day. Judge me and be confused as well.

Leave a Reply

Your email address will not be published. Required fields are marked *