PPP matters on an individual level, but not at all on a national level. GDP at market exchange rates is what actually matters in terms of what a country can accomplish on the world stage.
And even on an individual level, PPP struggles with accuracy, because things are only ever roughly equivalent. There's a reason why so many individual people are trying to move from China and India to the US and EU, despite all the personal financial disadvantages of doing so.
> because things are only ever roughly equivalent.
This is what people seem to misunderstand about PPP. PPP applies for daily/internal market goods. The cost of milk, eggs, clothing, etc. Which is definitely important. On a more macro scale it also compares a VW Vento in Mexico with a VW Jetta in the US...two particularly different cars with ~6000usd gap in price.
In other words, it compares basic goods for living; fudges some basic "luxury" goods, and pretends that that's representative of lifestyles. It ignores (in Mexico, for example) the fact that consumer electronics are ~20-40% more expensive (if available at all), access to truly equivalent basic luxuries (a VW Jetta for a VW Jetta) is still slightly more expensive, access to equivalent security/infrastructure/business guarantees nigh impossible to receive, and just the vast gulf of wealth inequality that exists, etc.
Wrong. People move from China to India despite the higher prices in America precisely because the increase in wages is more than enough to offset the higher prices.
True, my comment was ignoring the fact that America's per-capita GDP is higher even after controlling for PPP. People can move for a lot of reasons. Having a much more transparent and predictable justice system is also one of them. For instance, my money would go a lot further in Russia, but then I'd have to live in Russia.
But the point stands that market-exchange GDP matters more when it comes to comparing the relative strength of countries, rather than individuals, since it endows the government with greater purchasing strength. An era of trade wars might test this theory, but the ramifications of absolute isolationism would be far more complex than that.
>For instance, my money would go a lot further in Russia, but then I'd have to live in Russia.
It's important to point that if you were moving into Russia as an expat, you've already avoided much of the opportunity costs of building your career there first and instead going in having "made it" in another country.
If you are starting out in China or Russia, it's much harder relatively to climb to a similar position within those countries than in USA. Alot of expats might like how much their money goes in China with good CoL, but I'd be suprised if they were to send their children through the conventional route of the Gaokao and ultracompetitive Chinaese University Admissions and labour market. Getting into the Ivy or Berekely or a State Flagship and then FAANG is cakewalk in contrast.
> PPP matters on an individual level, but not at all on a national level. GDP at market exchange rates is what actually matters in terms of what a country can accomplish on the world stage.
That's demonstrably false cause the global super-powers (i.e. the US, Russia and China, maybe India, too) mostly depend on their internal markets only when it comes to their war industry and to paying their soldiers. When it comes to that PPP is a lot closer to the truth on the ground.
If we're talking military only, then you have to look at defense budgets, not GDP. The US defense budget is still much bigger than China's and Russia's combined, even after controlling for PPP.
By "what a country can accomplish on the world stage", I meant a more holistic view of what a country can do, such as investing, R&D, exploration, etc. (and also military).
And even on an individual level, PPP struggles with accuracy, because things are only ever roughly equivalent. There's a reason why so many individual people are trying to move from China and India to the US and EU, despite all the personal financial disadvantages of doing so.