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Why do so many traditionalists over 30 with no kids still believe in GDP?
A tweet compares the per capita income of two cities to conclude which is "richer". Nominal GDP ignores cost of living and distribution, and confusing the two leads to wrong conclusions.
A tweet claims that a city governed by the left has higher nominal per capita income than one governed by the right and is therefore richer. The figure is an average that accounts for neither prices nor how wealth is distributed, so the conclusion falls short.
The comparison is circulating on social media as proof that one model of government works better than another. The argument rests on a single figure: nominal per capita income, GDP divided by inhabitants without adjusting for inflation or price differences. It is a real number, but it only tells part of the story.
## What per capita income actually measures
Nominal GDP per capita adds up everything produced in a territory and divides it among its residents. If a city has **two million inhabitants** and produces a lot in financial services or tourism, the average rises even though much of that output never ends up in the pockets of the people living there. It is a miccionan, and means hide distributions.
It also says nothing about how much it costs to live there. A salary of **30,000 euros** in an expensive city buys less than one of **25,000** in a cheap one. Comparing nominal income across cities without touching prices is like comparing wages without looking at rent.
## The problem of mixing economics with political labels
Attributing a city's wealth to the political colour of its council ignores the fact that the local economy depends on factors a city government does not control: corporate headquarters, ports, industrial heritage, migration flows. The tweet assumes a causal relationship where there is only coincidence.
Per capita income is useful for comparing economic size. To know whether people actually live better, more data is needed: income distribution, prices, employment. With a single figure you can argue almost anything.
Summary of a discussion on Burbuja.info - Foro de economía, actualidad y política., translated from Spanish and reviewed before publication.
Read the full discussion (4 replies).
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