What's new

The absurdity of nominal GDP

Superboy

BANNED
Joined
Oct 2, 2013
Messages
6,298
Reaction score
-7
Country
Canada
Location
Canada
Nominal GDP depends a lot on prices in an economy. (And exchange rates).

The most commonly used example is a barber, who gives the same number of haircuts per day as a barber in another country.

Yet the price of haircuts is much higher in America, so the nominal output of their barbers is much higher, in dollar terms. However, in terms of actual productivity, they are giving the same amount of haircuts, their productivity/output is the same.

I live in Hong Kong, which has a very high per capita income. However, things here are also expensive, so even with a much larger amount of money, I am not necessarily "consuming" more products than someone from a region with lower per capita income, I am just spending more money to get it.
 
Nominal GDP depends a lot on prices in an economy. (And exchange rates).


I live in Hong Kong, which has a very high per capita income. However, things here are also expensive, so even with a much larger amount of money, I am not necessarily "consuming" more products than someone from a region with lower per capita income, I am just spending more money to get it.

I think the only difference here is the notion of "quality of life", the countries with higher per capita income provide better service compared to countries with lower per capita income for the same economic activity.
 
Last edited:
I think the only difference here is the notion of "quality of life", the countries with higher per capita income provide better service compared to countries with lower per capita income for the same economic activity.


Not necessarily. Zimbabwe had like million currency bills and they were poor as heck.
 
Finally some sane statement. I always said that Nominal is only a paper concept but not a tangible entity. Actual GDP is measured by units and thats where real GDP is measured and its in local currency.

Nominal is a paper calculation with currency exchange rate and PPP is measured by including cost factor to Nominal GDP.

So never count nominal GDP as true measure of quality of life.
 
2012 stats

population of Russia = 143 million
population of Italy = 61 million

ratio = 2.34

automobile production of Russia = 2,231,737
automobile production of Italy = 671,768

ratio = 3.32

conclusion: Russians have way more material wealth compared to Italians, despite smaller nominal GDP

List of countries by motor vehicle production - Wikipedia, the free encyclopedia

Since when is Nominal GDP decided on the basis of number of cars produced alone? And what about the value or worth of these cars? Is a Lada the same as a Ferrari?
 
Not all rich people drive luxury cars. It depends on taste. A lot of actors drive Toyotas and Hyundais.

And how does that have any changes on nominal GDP? An expensive car is an expensive car, doesn't matter who buys it. The wealth generated thus is disproportional in nominal terms for equal quantity of goods generated.
 
And how does that have any changes on nominal GDP? An expensive car is an expensive car, doesn't matter who buys it. The wealth generated thus is disproportional in nominal terms for equal quantity of goods generated.


Prices are set by buying tastes, not by products themselves. Who's to say a bicycle can't cost more than a Ferrari? :agree:

Russia produces more vehicles proportionally compared to Italy. That's more material wealth. A lot of vehicles produced in Russia are buses and trucks.
 
Car prices vary far to much depending on what country your in, its cheaper to buy a new car in the UK for example than in Spain etc and Russia is alot larger so a car is needed for most people whereas in Italy public transport and mopeds are very big, so thats sort of null and void. Not to mention quality of cars, I see the unlimited amount of dashcam videos from Russia and most cars that you can spot are not worth more than a months wage by the looks of it.

There are also alot of foreign car companies with factories in Russia so I assume that statistic is also export numbers to as you only have "production" in the sentence and not domestic users.

When comparing nominal GDP it works best to look at lower value items that are comparable across the world, e.g. a price of a McDonalds as the pricing structure around the world actually works out very well in relation to the wealth of that nation.

Which leads us onto the "big mac index" as the economists call it, the Russian price of a meal is almost a THIRD of that of the UK, and strangely enough Russia GDP per capita is almost a THIRD of that of the UK.

As such, you compare day to day items when looking at the GDP as these are the ones that people require to live such as food, rent, bills, not high value items as there are so many things to factor in that will change the price i.e local production, variety of models, rarity, logistical costs associated with that item being brought there etc.
 
Prices are set by buying tasts, not by the product itself. Who's to say a bicycle won't necessarily cost more than a Ferrari? :agree:

Russia produces more vehicles proportionally compared to Italy, that's more material wealth. A lot of vehicles produced in Russia are buses and trucks.

The value added to the system is called quality and performance.Try selling a Lada at the price of a Ferrari and maybe then you'll understand the difference. You'll still find buyers for the Ferrari though. Or for that matter, try selling a steel-framed bicycle for the price of a titanium-frame bicycle.

I take it that Economics isn't your strong point.
 
The value added to the system is called quality and performance.Try selling a Lada at the price of a Ferrari and maybe then you'll understand the difference. You'll still find buyers for the Ferrari though. Or for that matter, try selling a steel-framed bicycle for the price of a titanium-frame bicycle.

I take it that Economics isn't your strong point.

Have you graduated in some field related to economics, business or commerce etc. Your analysis seems more like a qualified person.
 
Back
Top Bottom