Ever wonder how various European countries stack up against the United States, economy-wise? The Mises Institute looked into it, and it turns out that the nations of Europe don’t even stack up too well against individual states.
Like, say, Mississippi. Excerpt:
Last year, a debate erupted over how Britain would compare to individual US states. In the UK Spectator, Fraser Nelson explained “Why Britain is poorer than any US state, other than Mississippi.” A week later, TIME shot back with an article titled “No, Britain Is Not Poorer than Alabama.” The author of the TIME article, Dan Stewart, explained that, yes, Britain is poorer than many US states, but certainly not all of them. (See below to confirm that the UK is, in fact, poorer than every state.)
The main fault of the Spectator article, its critics alleged, was that it relied primarily on GDP and GDP per capita to make the comparisons. The critics at TIME (and other publications) correctly pointed out that if one is going to draw broad conclusions about poverty among various countries, GDP numbers are arguably not the best metric. For one, GDP per capita can be skewed upward by a small number of ultra-rich persons. After all, it is just GDP divided by the total population. That gives us no idea of how the median household is doing is those areas. Also, it’s best to avoid averages and stick with median values if we’re looking to avoid numbers that can be pulled up by some wealthy outliers.
But, I’m really being too conservative with the US numbers here. I’m comparing OECD countries to US states based on a single nation-wide purchasing power number for the US. We’ve already accounted for cost of living at the national level (using PPP data), but the US is so much larger than all other countries compared here, we really need to consider the regional cost of living in the United States. Were we to calculate real incomes based on the cost of living in each state, we’d find that real purchasing power is even higher in many of the lower-income states than we see above.
We now see that there’s less variation in the median income levels among the US states. That makes sense because many states with low median incomes also have a very low cost of living. At the same time, many states with high median incomes have a very high cost of living.
Now that we’ve accounted for the low cost of living in Mississippi, we find that Mississippi ($26,517) is no longer the state with the lowest median income in real terms. New York ($26,152) is now the state with the lowest median income due to its very high cost of living.
This has had the effect of giving us a more realistic view of the purchasing power of the median household in US states. It is also more helpful in comparing individual states to OECD members, many of which have much higher costs of living than places like the American south and midwest. Now that we recognize how inexpensive it is to live in places like Tennessee, Florida, and Kentucky, we find that residents in those states now have higher median incomes than Sweden (a place that’s 30% more expensive than the US) and most other OECD countries measured.
Please do go read the whole article, as Mises’
That, True Believers, is an irony that must have old Charles Martel spinning in his grave.