Thursday, January 17, 2008

The Economies of Scale

Sorry if my recent posts have me sounding like a policy wonk -- perhaps that's my destiny, or maybe it's just the vacuousness (is that a word?) of the recent primary season -- but lately I've been taking an interest in comparing issues between the US and Canada. For example, my last post looked (in a limited way) at the two health care systems.

I presume most people reading this blog (and hello to all you commenters, great stuff thank you!) have an interest in learning more about Canada and/or how it relates to the US and vice-versa. As has been pointed out in comments, Canada does seem to have an emerging issue with wait times for high-end care, but my experience with the US system suggests that the "wait time" issue is just better managed (disguised?) but no less severe in the US.

I was actually just about to write up something on the relative scale of the US and Canadian economy when this very interesting map happened to come into my purview (click the map to see a larger copy):

This is a map of "relative Gross Domestic Product." Please note that this map is not weighted for population, it's only looking at the GDP output of each state and substituting a country name that has roughly the same GDP. Fascinating, Captain ...

For those who are a little rusty (as I was) on what exactly constitutes GDP, it's essentially the size of a nation's economy. As the source for this map put it, GDP = consumption + investment + government spending + (exports – imports). Now that you know that, take a another look -- and start being surprised!

When I started this I already knew that Canada's economy was in full "boom" mode last year -- so much so that they actually just lowered the national sales tax by a penny (we'll talk about how Canada taxes its citizens -- and what they get for their money -- in another post coming pretty soon). What I did not know was that Canada's economy -- keeping in mind that there are only 32 million people in the whole country -- is roughly akin to that of Texas (population 23 million), our largest continental state. Just as a side note for further interest, Texas' GDP is the second-highest in the US, but only half that of the #1 state, California. Even more interestingly, France's economy is roughly equivalent to our #1 state's GDP. I thought the French were on strike all the time, and constantly laying about, eating rich sauces and drinking wine heavily. What gives?? :)

Florida's economy being akin to South Korea's is also very interesting, and have a look at Mexico's ranking -- Chicago is a powerhouse of US capitalism (home of futures trading, for example) but has an economy comparable to "third-world" Mexico?? (Mexico is not actually a third-world nation, but it does have a lot of poverty and thus gives that impression to many in the US).

If you were to weight this map with relative population, another couple of surprises await you: the average Canadian makes less, but not much less, than the average Texan (I actually doubt this -- there are a lot more billionaires in TX than in CAN and I think that's skewing the results). Israel (population 7 million) has an economy that nearly rivals Pakistan (population 170 million) and compares to Oregon (population 3.7 million). Wow.

I would also not have guessed (at least, not before driving through it) that Wyoming's economy was the smallest in the nation. I would have thought North Dakota or tiny Rhode Island.

Finally, and again a testament to how much of a nerd I really am -- but does anyone else find it highly amusing that Minnesota's economy compares directly to that of Norway? :)


Anonymous said...

Hello you two, and welcome to "far wet coast"!

I just wanted to make a comment about using GDP as a measure to compare countries. Another set of components of GDP are lawsuits (and damages there from...) For example: A certain oil tanker in Alaska bumps a rock and dumps a load of oil into the water. The initial clean up costs are of course counted towards GDP. But, so are lawsuits. So, lawyers fees ($10s of millions of dollars); damages paid to residents ($Gazillions); Fines paid to the government; PR work to rebuild brand loyalty; More lawyers fees for the appeals; On-going clean-up and rehabilitation costs paid by the company, state, and federal governments; and I'm sure I missed a few costs.

The above example had minimal human health impacts. Imagine the amount of money that would have been involved by an accident that made a large population sick.

All of these are added to the GDP. But are they actually a positive measure. When you are comparing GDPs, I think it is important to take into other factors besides just the dollars.

As another hypothetical example of two countries with identical GDPs. One spends much more on education, and relatively less on health because their population eats right and stays active. Two spends less on education, but more on health because their population eats badly and never gets out for a walk. Would you say that the two countries are "equal"?

Anyway, use GDP as a measure cautiously.

Again welcome.....