Beyond GDP: The Economist’s Multi-Faceted Approach to Ranking Countries as Rich or Poor

Ranking countries as rich or poor can be a challenging task, as it requires taking into account numerous factors. While GDP is one such factor, it is influenced by the size of the population, which means that simply adjusting for population alone does not provide a comprehensive understanding of a country’s economic status. Dollar income per person is another commonly used indicator, but it fails to account for variations in prices between countries, leading to discrepancies in the standard of living.

To obtain a more accurate depiction of a country’s economic condition, The Economist employs three measures: dollar income per person, income adjusted for local prices (known as purchasing power parity, or PPP), and income per hour worked. By analyzing these three indicators, The Economist is able to provide a more nuanced and insightful analysis of each country’s economic situation.

By considering factors such as income per person, purchasing power parity, and productivity levels, The Economist can achieve a more accurate assessment of each country’s economic status. This multi-faceted approach allows for a more comprehensive understanding of the varying economic conditions worldwide.