Bloomberg’s Noah Smith makes an interesting point:
“Many of the little
quality differences -- Japan has
longer-lasting products, cleaner buildings and streets and food that’s
healthier but still tastes great -- won’t show up in the relative GDP numbers.
Economists can correct for relative price differences by measuring the
disparate prices of non-tradable goods and services -- an adjustment known as
purchasing power parity. But PPP will tend to miss a lot of these quality
differences….
So while GDP is a good
measure of the really big economic differences between rich and poor countries,
it’s not very good for comparing the true economic well-being of different
countries at similar levels of development. If you want to know whether Japan,
the U.S., Germany, South Korea or some other rich country is truly wealthier,
you can’t just look at the GDP numbers -- you also have to live there and see
for yourself.”