Now, Samo makes what I think is a major mistake here — using GDP at  market exchange rates rather than at  purchasing power parity. If only imports

Yes, Americans are much richer than Japanese people

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2024-12-26 07:00:05

Now, Samo makes what I think is a major mistake here — using GDP at market exchange rates rather than at purchasing power parity. If only imports mattered for living standards, we could use market exchange rate GDP here, since that reflects how many imports you can afford. But because most of what people buy — rent, health care, transportation, and so on — is produced domestically, you really need to account for those prices when you measure living standards. If people can get cheaper rent, health care, and transportation, they are richer. This is what PPP tries to do. And when we look at the PPP numbers 1 for the U.S., Austria, and Japan, they’re a lot closer together than the numbers Samo quoted:

But there are a number of people who think even that difference is greatly exaggerated. They point out that Japan has a very safe society with high life expectancy and functional public transit, while America is a comparatively dangerous society with much lower life expectancy and poor public transit. Here are a few examples of replies I got when I pointed out that Japanese living standards are significantly lower than Americans’:

To answer East Bay Ray’s question, I have lived in Japan for four years, so I think I have a decently good perspective on how Japanese people live. I think what’s going on here is that Ray lived in Japan a while ago, and Japan and the U.S. used to be a lot closer to each other in terms of living standards:

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