Tuesday, November 25, 2008

Delusion

The Globe on GDP in Ontario. Let me quote:
The report says that if Ontario were able to raise its GDP per capita to even the median of its peers in North America, the after-tax disposable income per household in the province would rise by $9,200.

That didn't seem quite right to me. So I went and read the report, available here.

If you care to reference figure 2, you can observe that the difference in per capita GDP between Ontario and the median of a bunch of arbitrary US states plus Quebec is $6500 (Canadian). This statistic is completely useless, but it's also pre-tax!

Indeed, the $9,200 extra in disposable income seems (the report doesn't actually mention this) to come from computing 'what if Ontario became richer than any state in the bunch of arbitrary states we've selected', the state in question being New York. They then use this figure to denote the "prosperity gap", by which they imply 'Ontario should be this much richer'.

I also can't tell whether New York's GDP has been computed in Canadian dollars by multiplying by an exchange rate, or via a PPP-based computations. Either way, let's condemn both the Globe for not reading the report and the authors for being totally misleading by effectively saying that bad government policy is why the average Ontarian is out $9,200 after tax.

Somehow, I don't think most people reading the article are going to reach these conclusions, though...

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