Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Chinese economy overtakes the U.S.’s to become the largest

marketwatch.com

Post reply on HN
Print view View original

61–70 of 141 posts

Re: Chinese economy overtakes the U.S.’s to become the largest

#61

Post by crdoconnor »

jvm wrote: post #56
crdoconnor wrote: post #53

Earlier quoted context omitted.

>It gets even crazier: > >Economy C, the government pays workers $5m total to dig unwanted ditches. Nobody gets a computer. Because GDP is not nor was it ever meant to be a measure of how great your country is. It is simply a measure of the total volume of transactions (which correlates to wealth but is far from being the same thing).

Certainly Nominal GDP is a measure of the volume of transactions. However, PPP-adjusted GDP is intended to be a measure of national income in real terms, or put another way, the amount of value actually produced. Which is how people often intuitively think of GDP.

Um, $5 million to dig a ditch still means no value produced even if it was PPP adjusted.

Re: Chinese economy overtakes the U.S.’s to become the largest

#62

Post by jvm »

AmirS2 wrote: post #57
jvm wrote: post #45

Earlier quoted context omitted.

> So, it's not entirely clear if China is really the biggest economy, or just by using an accounting trick called PPP GDP. There is no objective way of measuring the size of an economy. Imagine some hyper-simplified economies where the only asset produced is computers. Economy A sells 1000 Apple IIs* per year at $3k each. That means it has a nominal GDP of $3m. Economy B sells 1000 Retina Macbook Airs at $1k each, fo…

In Economy C, the workers who've been paid by the govt can then purchase 5000 Retina Macbook Airs at $1k each, the govt receives sales tax, apple employees get paid and pay income tax, and apple employees then spend their remaining money buying more Macbook Airs (going by your simpification that the only asset produced is computers) ... net GDP is then some way over $10m and everybody has a computer and is employed e…

> In Economy C, the workers who've been paid by the govt can then purchase 5000 Retina Macbook Airs at $1k each

You are assuming transaction costs of 0 for international trade. If transaction costs for international trade are zero, then yes, of course the PPP adjustment would be a non-op. In the real world that we live in, equivalent goods often have very different prices in different countries.

Re: Chinese economy overtakes the U.S.’s to become the largest

#63

Post by jvm »

crdoconnor wrote: post #61
jvm wrote: post #56

Earlier quoted context omitted.

Certainly Nominal GDP is a measure of the volume of transactions. However, PPP-adjusted GDP is intended to be a measure of national income in real terms, or put another way, the amount of value actually produced. Which is how people often intuitively think of GDP.

Um, $5 million to dig a ditch still means no value produced even if it was PPP adjusted.

Nominal GDP: $5mil

PPP adjusted: $0

Re: Chinese economy overtakes the U.S.’s to become the largest

#64

Post by aunty_helen »

sneak wrote: post #46
pmontra wrote: post #17

This is a ranking about PPP. There are about five Chinese persons for every American. The sum of their income will keep getting larger and so will their economy. GDP and economic output don't automatically relate to how well people live but they do relate to the influence a country has over the world. If we care about how happy people are in their country then maybe we should look at http://www.oecdbetterlifeindex.or…

Or maybe we should stop moving the goalposts because this article isn't about anything per-capita and isn't titled "Chinese quality of life tops the US". It's about total economic might.

No lets keep modifying the model so we come out on top until it's no longer ignorable... after that we'll just lie.

This just in, according to songs written by Jim Morrison the west is better 100% of the time.

Re: Chinese economy overtakes the U.S.’s to become the largest

#65

Post by danieltillett »

Tyrannosaurs wrote: post #42
pmontra wrote: post #17

This is a ranking about PPP. There are about five Chinese persons for every American. The sum of their income will keep getting larger and so will their economy. GDP and economic output don't automatically relate to how well people live but they do relate to the influence a country has over the world. If we care about how happy people are in their country then maybe we should look at http://www.oecdbetterlifeindex.or…

Interestingly if you put in the cliche American free market priorities (jobs, income high, safety, work life balance, environment low, everything else in the middle) the US does come out top (as opposed to high but not top on a more even measure). The same things seems to happen if you put in the sort of priorities other countries are generally believed to hold (so put in the environment, satisfaction, work life bala…

As an Australian the thing that makes Australia a great place to live is the same that makes it suck - distance. It does have California's weather without the risk of earthquakes which is hard to beat :)

Re: Chinese economy overtakes the U.S.’s to become the largest

#66

Post by danieltillett »

vorg wrote: post #58
Tyrannosaurs wrote: post #42

Earlier quoted context omitted.

Interestingly if you put in the cliche American free market priorities (jobs, income high, safety, work life balance, environment low, everything else in the middle) the US does come out top (as opposed to high but not top on a more even measure). The same things seems to happen if you put in the sort of priorities other countries are generally believed to hold (so put in the environment, satisfaction, work life bala…

> Australia being a great place to live - they don't have a slider for "Deadly animals" Australia has poisonous snakes and America has grizzly bears -- only New Zealand can claim no deadly animals.

Obviously you have never met a drunk kiwi.

Re: Chinese economy overtakes the U.S.’s to become the largest

#67

Post by crdoconnor »

kokey wrote: post #22
FireRabbit wrote: post #7

Whether it is or not doesn't really matter. The Chinese economy has been doubling every 10 years or so since 1980. So if it isn't the world's #1 now, it very soon will be.

The same was said about Japan when it was on the up.

A fair point, but there are still some crucial differences:

* Japan was (and is) effectively a US military protectorate. It could follow its mercantilist strategy up to a point, but it still had to capitulate to American demands (e.g. to open up its economy + stop putting downward pressure on the yen). China has no such restrictions and does not have to open up.

* Overall the Chinese economy is far bigger and the US is far more dependent upon it than it was upon the Japanese economy in the 90s.

China still looks like it may be facing a debt-crisis the likes of which Japan had in the 90s.

Re: Chinese economy overtakes the U.S.’s to become the largest

#68

Post by tomp »

jvm wrote: post #45
tomp wrote: post #2

> These calculations are based on a well-established and widely used economic measure known as purchasing-power parity (or PPP), which measures the actual output as opposed to fluctuations in exchange rates. So a Starbucks venti Frappucino served in Beijing counts the same as a venti Frappucino served in Minneapolis, regardless of what happens to be going on among foreign-exchange traders. > PPP is the real way of co…

> So, it's not entirely clear if China is really the biggest economy, or just by using an accounting trick called PPP GDP. There is no objective way of measuring the size of an economy. Imagine some hyper-simplified economies where the only asset produced is computers. Economy A sells 1000 Apple IIs* per year at $3k each. That means it has a nominal GDP of $3m. Economy B sells 1000 Retina Macbook Airs at $1k each, fo…

Your example is exactly comparing the economies by PPP, without taking into account the exchange rates. The point is that if you establish trade between economies A, B, and C, people in A would figure out they can get a better deal by buying computers from B, hence the exchange rate would rise, and B$ will be worth A$10 or so. And $C will inflate rapidly, with the government eventually going effectively bankrupt.

Re: Chinese economy overtakes the U.S.’s to become the largest

#69

Post by AmirS2 »

jvm wrote: post #62
AmirS2 wrote: post #57

Earlier quoted context omitted.

In Economy C, the workers who've been paid by the govt can then purchase 5000 Retina Macbook Airs at $1k each, the govt receives sales tax, apple employees get paid and pay income tax, and apple employees then spend their remaining money buying more Macbook Airs (going by your simpification that the only asset produced is computers) ... net GDP is then some way over $10m and everybody has a computer and is employed e…

> In Economy C, the workers who've been paid by the govt can then purchase 5000 Retina Macbook Airs at $1k each You are assuming transaction costs of 0 for international trade. If transaction costs for international trade are zero, then yes, of course the PPP adjustment would be a non-op. In the real world that we live in, equivalent goods often have very different prices in different countries.

Well, in our hyper simplified economy, the macbook airs are produced domestically - it's the only thing produced in fact (apart from ditches I guess)!

Re: Chinese economy overtakes the U.S.’s to become the largest

#70

Post by Thimothy »

nothrabannosir wrote: post #35
seanmcdirmid wrote: post #10

Earlier quoted context omitted.

Ironically, Big Macs are on sale right now for 10 kuai in Beijing.

Nice. Maybe not in China, but some countries force McDonald's to lower their BigMac price to hack that index. The Wikipedia page mentions countries doing this, and, seeing the quality and price of Big Macs in some places compared to other Mc burgers, it's not surprising. E.g. the Argentinian one was half price of everything else, it was an awful burger, meat covering half the bun. And it was never advertised, only co…

Ah, Argentinian creative economics. I follow their developments from time to time just for the amazement value, this one is new for me, thank you.

For those curious, here is an excellent article about its history, worth the read: (Paywall) http://www.ft.com/cms/s/2/778193e4-44d8-11de-82d6-00144feabd...

(Google cache version) http://webcache.googleusercontent.com/search?q=cache:eFrFcG7...

And another one with some of the juicy parts: http://www.businessinsider.com/a-timeline-of-argentinas-sord...

Post reply on HN