The euro and the dollar

As a long-time resident of the US currently sojourning in the Netherlands, I can tell you my euros are disappearing fast (and therefore my dollars proportionally faster), and I’m not living the atypically expensive life of the tourist: I’m renting an apartment, cooking for myself and doing my own laundry.

As you state, it’s difficult to find any meaningful sort of equation in, for instance, transport costs: I’d be curious to see how healthcare is handled in calculations of this type.

Has anyone ever tried to estimate the levels of uncertainty within PPP comparisions – if so maybe they would find that the EU (at least the older parts) and US would overlap within those error margins. At least that might be the impression most people have, hence the lack of net migration (although using France to the US might not be the best example to support this – the UK, Germany or Scandinavian countries might be better options to support such a statement).

What you probably can do is tell how things are changing to a reasonable degree of accuracy though, as most of the errors in comparison are likely to be structural and only change in the long term. So if EU PPP indexes are rising and the US is static, then its probably a reasonable assumption that is a true reflection, even if you can’t so definitely tell whether that suggests that the EU is catching up with, or moving ahead of the US in absolute terms.

PPP’s roughly 1 to 1 equivalence is easy to see comparing amazon.com with amazon.de. Sometimes it’s cheaper to order from amazon.com with $15-$20 shipping than buying from amazon.de with free shipping.

The first link goes to DHS not ICP.

VAT VAT VAT…
VAT taxes imports but not exports, income tax taxes exports but not imports. Might just make a difference?

Which is sort of the point – less than 3 miles you are considering close for a superstore in the US. In the UK I have one store (14-16 checkouts to help gauge the approximate size) within 100 yards, a second is about half a mile away at about a 120 degree angle (which is slightly bigger), and on the third 120 degree spoke the nearest is about 3/4 to a mile away (not sure how big exactly, but I guess similar is size). In the last four towns I have lived in, I would have lived within a mile of a superstore every time, and thats not by choice but they are spread evenly in and around the edge of every town, probably smaller than you might expect in the US (and hence higher costs), but more convenient.

“Europeans prefer shorter trips to smaller and more expensive stores, there’s no obvious way of saying that one set of individual and collective preferences is better than the other.”

Well, I can think of one obvious way. That’s not to say it’s objective, but it’s pretty obvious.

The real killer in these kinds of income comparisons, to me, is whether the “income per person” is a mean or a median of the population income. Conservatives want you to notice the former, where the USA historically does well, while liberals want to know the latter, where the USA, despite its vastly higher GDP, barely manages to exceed much smaller countries. And yet the latter is what predicts the income of a random stranger picked off the street. The former statistic is easily skewed by a small number of extraordinarily wealthy people, who you’ll never actually meet.

The difference is in the redistribution of wealth via corporate and progressive taxes, less than 20% of GDP for the USA, and approaching or exceeding 40% for most European countries.

In the UK I have one store (14-16 checkouts to help gauge the approximate size) within 100 yards, a second is about half a mile away at about a 120 degree angle (which is slightly bigger), and on the third 120 degree spoke the nearest is about 3/4 to a mile away (not sure how big exactly, but I guess similar is size). In the last four towns I have lived in, I would have lived within a mile of a superstore every time

More or less the same was true for me in the U.S. when I lived in town, and I suspect it is true for most urban areas that aren’t economically depressed. Now that I live out on the suburban/rural interface with deer munching my shrubs, I have a Walmart, a Home Depot, and at least three supermarkets within 5 miles. I’m fairly sure that my relatives who live in the UK (in Cornwall) have a longer drive to shopping than I do. I do know that I can drive further in less time than they can, so if we factor in time required to go out and buy groceries or a novel at the nearest bookshop, I probably come out ahead.

Perhaps the best price comparisons would be for items like books or electronics for which there is no significant difference between European and American preferences.

”
In the UK I have one store (14-16 checkouts to help gauge the approximate size) within 100 yards…
In the last four towns I have lived in, I would have lived within a mile of a superstore every time, and thats not by choice but they are spread evenly in and around the edge of every town, probably smaller than you might expect in the US (and hence higher costs), but more convenient.
”

In my experience, this sort of thing is not a big deal. I’ve lived in places like this, and the consequence is that you pop over to the local store, NYC style, for the most minor things. Now the closest Ralphs is half a mile away and I walk there maybe once a week, rather than every day. When I was at college the nearest Wegmans was maybe five miles away and we would drive once a week.

I wouldn’t say any of these is better than the other. If these are the metrics by which one is comparing societies, one is grasping at pretty flimsy straws.

I suspect, however, that there is a kernel of truth in the observation which is the following.
The post discussed the relative costs of goods (imports) and labor (services). It did not discuss the costs of land. For all the hoopla about the high costs of real estate in Manhattan or San Francisco, the US as a whole is not especially densely populated. Most manufacturing, retailing, agriculture, and even poor people, can find land and real estate appropriate to their needs at far lower costs than Europe, and I suspect this explains most of the difference.

IMHO Europe is somewhat kidding itself in this regard. High densities in a few places are reasonable, but high densities across the whole continent, while they allow people to feel virtuous about how little driving they engage in, don’t change the basic laws of nature. Items like food, under these circumstances, either have to be trucked in from elsewhere or raised using aggressive fertilization. Both ways, the ecological footprint is much larger than the size of the continent of Europe.

In summary:
* too many people is a problem, not matter how you slice and dice it. It’s a problem if they’re spread across a large continent like the US or packed into a small one like Europe BUT
* a denser population results in a more expensive lifestyle

Neither are sustainable, but the Americans will be able to buy more goodies on the way to the end.

It seems to me that if you are going to drive to a store, there isn’t all that much benefit to having it within 1 mile as opposed to ~5 miles–certainly not a proportional benefit, considering the fixed costs in time and gas for a single trip. The real benefit to having stores nearby comes if you can walk to them; but that places significant limits on the amount you can buy at once. So we end up with two models–the urban European one, in which one shops frequently at nearby stores, and the suburban American one, in which one shops infrequently by car at more distant stores. This in turn feeds into a host of other differences–for example, reduced working hours so that you have time to shop frequently, fresher foods because they are purchased more often, and so on and so forth. This seems pretty clearly to be a matter of different preferences.

I think PPP makes little sense because costs in different parts of the same country are vastly different; I am twice as well of making the same amount in Seattle as I did in San Francisco. Also, PPP doesn’t really take habits in to account at all. Yeah London is more expensive that San Francisco, but what if you don’t need to have a car in London and do in San Francisco? How can these things be normalized?

Finally, in crazy-expensive Norway a block of cheese costs the same as a bottle of water. Take that cheese to American, and now it costs as much as five bottles of water. PPP will say that the cheese maker is creating less economic activity in Norway but is he really? Does that actually make sense? And does the cheese eater in America who spends 1% of his income on norwegian cheese really consume more ppp than the norwegian who spends eats the same amount of the same cheese?

With respect to PPP, my observation has been that having seen friends living in the UK, Belgium, and France, they don’t live nearly as well, in a material sense, as they would with an equivalent job in the U.S. And that’s in provincial cities, not London or Paris.”

I have no opinion on Slocum’s conclusions here, but this is certainly the correct method. Much better than trying to quantify the unquantifiable, a la PPP.

What Andrew said. PPP figures are particularly bogus for developing countries, where one night in a hotel room in the capital could buy you a house in the village. So when I read that X million people live on less than $1 a day, *PPP adjusted*, it’s difficult to understand what on earth that means. (Except that it’s not good.)

Of course, this raises another point. I’m guessing (based on extensive CT readership demographic research :-)) that your friends are in the top quintile of the income distribution, and that’s a lot further above the median in the US than in the UK or Europe.

Yes, probably, give or take — a pair of academics and an engineer with a wife working part-time.

My observation is exactly the opposite, so there you go. But perhaps your definition of ‘material’ is narrower (or grounded on different terms) than mine, and your comparison of jobs different. Perhaps a comparable job in Europe might not offer the option of more square feet, two bathrooms and a big, comfortable car for the inevitable commute, but I’d certainly feel richer.

Yes, housing is the most dramatic example (in the UK, in particular, it seems to have completely lost touch with reality) but also computers and cameras and that sort of thing and dining out and drinking, too.

As for the ‘inevitable commute’ — commuting time in EU countries is quite a lot longer than in the U.S. Average in the U.S. is 24 minutes:

http://usgovinfo.about.com/od/censusandstatistics/a/commutetimes.htm

Whereas in the E.U. it is 38 minutes (and 45 in the UK):

http://news.bbc.co.uk/1/hi/uk/3085647.stm

And within the U.S., the pattern is that the dense urban areas that are more like Europe have the longest commutes.

Here’s a world comparison showing North America having the shortest commutes:

http://www.worldmapper.org/posters/worldmapper_map141_ver5.pdf

Which also seems to follow the same general pattern of high-density -> long commutes.

Anecdotal and all that…

I transferred from a position in Portland, OR to Nice, France for a couple years for a computer mfg. We lived in a small village, La Colle Sur Loup, outside Nice. It was a very pleasant town. We drove maybe 8km every weekend to a Carrefour for our major grocery shopping, as did many of our neighbors. Think of it as the Wal-mart of France with busier aisles and you aren’t so far off. In a professional position with a 20% expat salary adjustment I still didn’t have the purchasing power I had in Portland. It wasn’t like I was trying to buy Post Raisin Bran and Skippy Peanut Butter or something; it was just a lot more expensive to do pretty much anything living there. It also may be that the Pacific NW is veggie paradise, but the choices and prices for fresh produce were both less varied and more expensive in France, and contrary to my expectations the farmer’s markets here are better. I had a lot of fun living in France and the village was a lot more pleasant than my US residence at the time. I didn’t have to work nearly as hard and vacations were longer. But in my experience it was a lot more expensive.

Don N

A Dell UltraSharp 2407WFP 24-inch Monitor will currently set you back £695 ($1383, €1030) in the UK, and £336 ($669, €498) in the US, meaning it would be cheaper to fly BA to New York (from £329 return) to pick it up.

This can’t be true. There’s probably a European-market equivalent for this particular US-market monitor (probably Dell’s as well) for a price similar to the US price.

A Dell UltraSharp 2407WFP 24-inch Monitor will currently set you back £695 ($1383, €1030) in the UK, and £336 ($669, €498) in the US,

In Google.co.uk, the first link I found for the above product in the UK was £380…

Of course, there’s more to commuting than time costs. Cars are costly capital items with significant operating costs. That has to be set against public transport, which makes for some big difficulties in the PPP comparison.

Sure. But of course there are non-monetary benefits to auto commuting over public transit. See, for example:

https://crookedtimber.org/2006/05/06/you-just-flunked-out-of-feminism-101-wait-stupid-also-just-failed-out-of-moron/

But whatever the reasons, Europeans are increasingly car commuters, too. From the BBC article about commute times:

“Outside the capital, only 11% of people get to work by public transport and just 5% of commuting is by national rail.”

So many of those longer European commutes are behind the wheel, too.

And are commute times a reasonable proxy for time spent traveling for other purposes (shopping, dining out, etc)? I suspect that they are (since commute time is really a measure of how difficult/time consuming it is to get around), but I don’t have any data.

As for traffic deaths in the U.S., death rates per capita are much lower than historical rates (though they’ve been flat since 2000):

http://www.infoplease.com/ipa/A0922292.html

However, this article argues that continuing declines in death rates per vehicle and per passenger mile are entirely the result of improved vehicle design and that if it were not for that, rates would be trending up slightly:

http://www.iihs.org/news/rss/pr081006.html

One of the things that works against the U.S. in this regard is that so many teens drive, and teens are generally poor drivers with high accident rates (an issue at many U.S. high schools is parking for student-driven autos).

And are commute times a reasonable proxy for time spent traveling for other purposes (shopping, dining out, etc)? I suspect that they are (since commute time is really a measure of how difficult/time consuming it is to get around)

No, commute time is a function of the distance between residential areas and industrial\commercial hubs, which in turn is largely driven by housing scarcity and prices. I, for instance, have a 45min to 1 hour commute, but live within 10 min *walking* distance of two different malls.

come to Japan. I ride my bicycle everywhere, no more than 5 minutes to anything, my rent is cheap, I am living across the road from the supermarket, food is decently priced (compared to Australia), eating out is cheaper than Australia and the service a million times better, there are zero safety fears of any sort (including traffic – the speed limit is 50 kmh), dentistry is vastly cheaper, and everyone moves at a slower pace. It’s great. Japanese people consider 15 minutes’ commute to work to be a long journey, and real estate agents’ eyes pop out of their head if you say “it’s okay, 30 minutes is fine with me.”

Electricity is expensive though. And rockmelons are stupidly expensive. So don’t come here if you like rockmelons. Unless you’re willing to replace them with strawberries, which are cheap and really really really really good.

This whole conversation is very interesting to me, as I just spent 2 weeks with my in-laws outside Koblenz, Germany. Once you get past housing square footage, I don’t see a lot of daily living factors favoring the US. Yes, clothing is more costly (and better-made). No, people don’t expect to see you in different clothes every single day. I’m baffled by the comment above that dining and drinking out is more expensive – where, exactly, in America do you get superb Rhein wines for $2.70 a glass? Because that’s what I paid in nearly every restaurant (fancier places approached $3.50). A nice dinner of good quality food (no jokes, I like German food) comes in for around 10 Euros – I can assure you, as a restaurant reviewer in a low-cost US city, that eating out in the Rheintal is absurdly cheaper than in the US. I might add that, in a fair amount of driving in both dense and less-dense areas, I didn’t see a lot of congestion – much less than in my shrinking Rust Belt home city.

I know that my impressions are far from definitive, but I’m simply seeing a lot of the objections raised to Euroliving flatly contradicted by my experience.

And then, of course, there’s the fact that Americans are working at least 15% more every week, plus 9% more weeks a year (13% more for the tens of millions who get no paid vacation at all). To me, the question “would you be willing to work 20% less per year and live the Euro-lifestyle?” is a no-brainer (family ties and baseball keep me here, alas), but I know it isn’t for all.

Oh, I almost forgot:

That point way up above about Europe becoming so dense that there’s no nearby farms? Was that a joke?

The hallmark of European land use is dense settlements separated by farmland and/or forest. The density doesn’t come in the form of some sort of sci-fi planet-city, but in the form of compact, defined settlements that leave room for farmland to persist. So, as a result, my first meal in Germany featured in-season white aspargus that had been literally picked that day and walked (possibly biked) to the restaurant. And this is within sight of a city of 100,000 (also a nuke plant, an electric windmill, and an IKEA). And the strawberries – again, grown right there were the best I can ever recall having.

But my experience is also that more of the shopping/dining/entertainment in European cities is also in the central district whereas those things, like offices and other places of business, are more dispersed in the U.S

Shopping, dining and entertainment are *always* close to residential areas. How could they be otherwise? A 1 hour commute on top of a 9 hour workday is tolerable; a 1 hour commute for a half-hour shopping trip is not. Shops would go out of business given any other zoning model.

“Commuters increasingly travel within or between suburban or exurban areas rather than to and from ‘downtown’. Probably this has not changed as much in Europe”

Anecdotal, but working for a few years as an independent IT contractor, my daily commute from North London varied quite a lot, but was mostly to other suburbs.
In turn I went to Croydon, Milton Keynes, Shepherd’s Bush, Sunbury, Sidcup, Croydon again, Southall & Romford*. Average commute, 70 minutes each way. But I was broke, and, particularly at first, desperate. Then I went permie for 3 years. At Kingston.

*For a while I was working days at Romford, evenings at Southall. That was heavy. But if you’re working for yourself you never say no to a gig.

Imagine trying to do that commute on a penny farthing.

How could they be otherwise? Don’t many New Yorkers ride the subway in for a night on the town and ride it back out again?

I don’t particularly care what the motivations of “many New Yorkers” may be. If you have a low margin service or retail business you want to locate it as close to as many customers as possible. Outside high density cities this means close to residential areas.

And have you ever heard of outlet malls?

Yes I have. They are primarily an Americanism.

Remember that all this is in response to your assertion that there must be a correlation between commute times and trip times to shopping centers etc. There is no such correlation, at least in Western Europe. There is a correlation between housing scarcity and commute times. Convenience stores, restaurants, movie theaters are located close to residential areas. Sure, in order to experience the delights of big city entertainment you have to travel to the big city, if you don’t live there already. You want to see a Broadway show, you pretty much have to go to Broadway. But buying groceries, getting a bite to eat or catching a movie are things you can do with a 5 min ride in more or less any European urban area, and I suspect, almost any US one as well.

I don’t particularly care what the motivations of “many New Yorkers” may be.

Well OK, then, how about Londoners or Parisians? Is it an odd thing in those places to ride the subway to go out for dining or entertainment?

If you have a low margin service or retail business you want to locate it as close to as many customers as possible. Outside high density cities this means close to residential areas.

But that’s not inconsistent with people traveling for dining or entertainment. Even when you locate near certain residential areas a large fraction of your customers are coming from outside the neighborhood — especially in low-density areas, but even in dense cities as well.

Remember that all this is in response to your assertion that there must be a correlation between commute times and trip times to shopping centers etc. There is no such correlation, at least in Western Europe.

It wasn’t an assertion, it was a conjecture. A conjecture supported by familiarity with Americans and Europeans who do ‘commute’ for entertainment and recreation (both inside and outside dense areas).

Even if there’s a “European lifestyle” or an “American lifestyle” (there’s quite plainly a difference in *average* costs of living, as implied by the PPP figures), the difference is swamped by the intrastate differences. It’s possible to trade time for money in innumerable ways in either place. I, for instance, have a modest 2-bedroom house in Berkeley, California, where the commute into the city is half an hour (and the food is the best in the entire world, btw). But plenty of people are willing to live 2 or 3 times as far away in exchange for 2 or 3 times the space per dollar. I’m sure the same calculus exists for most Europeans.

I think personal comparisons are heavily distorted by the exchange rate. When in 2001 you saw a job in the US of $40k you’d translate that to e47k, and you’d conclude that that is substantially more than a comparable job in the Netherlands.

Now $40k means just e30k, a drop of 36% compared to 2001. Not so good anymore, and when you do a comparison using products produced in dollar countries like the Dell monitor above, you’d think you are really better off in the Netherlands with current exchange rates.

Reality may be different, but the perspective on whether pay is better in the US has definitely changed in the Netherlands.

cure at 50 writes:

I find the comments about Europe being cheaper than America mindblowing. I make the (market exchange rate) equivalent of 22,000 pounds in a major U.S. city, and that’s enough to rent a 1000 sq. ft. apartment, drive a new BMW convertible, eat out more or less as much as I want, take multiple overseas trips each year, play golf every weekend, and still sock away over 10,000 dollars in savings.

Bullshit. I don’t believe you. Name your city and itemize these expenses. $100/sf is very cheap in the US, few major cities allow it in neighborhoods that aren’t dangerous. So that means a 1,000sf apartment would cost at least $600/month. Multiple overseas trips is a few thousand a year unless they are paid for on expense accounts. Federal and payroll taxes alone will eat at least 15-20% of that salary, in some states/cities the burden is much higher. Eating out as often as you want? I can attest that the cost of food given that runs easily to $1000/month for a single person. 1500+ in most places. Golf every weekend? Perhaps you have a cheaper option for that than I’m aware of (I don’t golf), but my understanding is that one typically pays $30 for 18 holes even at the cheapest public courses. A country club membership is *much* more.

I did a search on carmax for new BMW convertibles near me. I put a max price of $30k. It produced one car: a used ’02 with 37k miles for $29,995.

Let’s give you *huge* benefit of the doubt and suppose you got that convertible for $30k new. Your implication is that you can be regularly driving a new-ish car, so I think it’s reasonable to expense it over 6 years, giving a capital cost of a bit over 6k a year at 6% discount rate.

So with very generous assumptions about car, apartment and food costs, we’ve already got to around $30k dollars on a take home salary of about $36k. We’ve spent no money on utilities, phone, computer, internet, tv, books, any other entertainment, clothes, furniture, housewares, gifts, gas, insurance, random miscellaneous expenses, and even if that’s somehow all zero, I still can’t see where that 10k is coming from unless you’re not paying taxes. Maybe you bought that new BMW and condo out of previous savings and aren’t counting the capital costs?

Either you’ve found some obscure “major US city” where the cost of living is hugely lower than everywhere else I know, or there’s something wrong with your accounting somewhere.

Or you know some trick that I don’t, and would really like to hear about, because I don’t find I can do all those things easily, and I make quite a bit more than £22k at market rates (admittedly not in the cheapest area of the country).