Big difference are you at a 60 year old teach and then you can also get like 25 year old in I don't think what is better than the other, but you're right, like it sometimes. They're all teachers. I don't sometimes they be really bad and they also teach very differently, right? It's very different. It's very variable at schools you got get really good teachers than teachers that have been doing the same thing for so long. It's a bit hard to stay motivated maybe, right? Yeah chez okay. Wow. Mm, okay. So what are your what's your feeling for Econ as a hub maybe Rory for this summer? How are you feeling? Which area of micro macro do you think needs more work that is might probably matter a bit more because obviously it's more important than it's hard. It's more macro. Okay, so macro. Which area of macro do you think you have done a bit over the past few weeks, right? Which area of macro do you think you're less comfortable with? Which part of the macro and. Just theme two and theme four. I think thefrom thetwo like I am, I'm really, I think we need to go through. So things we need to start from thing two you want. So theme two you find harder than theme four this year? Yeah. Okay. And what about them two? Anything in particular? Like we go and just go through orin general No Yeah but I'm saying like knowledge what we can do like we can do anything I'm open I don't really mind is just I want understand what do you find hard at right but anything in particular you know we've talked about latwe've talked our fiscal policy right we've talked about the voluntary policy and supply side policies right Yeah is there anything obviously seem to in there's a few other things but is there anything else the maybe your teacher didn't explain well potentially. I don't even like remember that while what is exactly inside of what what is inside of theme two like after fiscal policy? Okay. Okay. So should we go through theme two? Let's go through theme two again. And itbe great. Rory, yes, we'll go a bit quicker today. And I just wanted to participate as much as you can. Again. Thatbe great. If you participates as much as possible. And just tell me if you really don't know it's fact. It's not, I mean, I don't for me, I don't mind, right? It just I want to understand where we need to go a bit slower, a bit faster. Okay, so the start of theme two, which is the start of a level macro, right? Rory is basically thinking about what is the macro economy and how we measure economic performance. Yeah, Yeah. Okay. So what is the standard way of measuring macro performance? What's the most classic measure place, right? Economic growth, right? But so it's measuof maclike, let's say economic growth, right? Let's okay, maybe there's many other things in macro, but you you was thinking about the macro objectives, right? So you'll think about inflation, economic growth. There's quite a few where we've talked about inequality in the past, we've talked about sustainability, but let's focus on economic growth rate, on the macro economy, let's say about agridemand and output rate. What's the most important and famous indicator for economic growth and ardemand, etc. What's the most famous indicator that Eric gets quoted on the news all the time? You know. What is it? Because I can't think about you. Go GDP, right? Yeah, GDP right. What's GDP? GDP is. GDP grodomestic products. And what does it can you would you know about GDP like more or less? What does it measure? What does it kind of, let's say why it's always used, right? Like, Oh, the GDP of China is, the GDP of the uk is this way. Why do you think it's used all the time and what does it actually mean? Can you know any more specific details? It means like. In such. Like how much things have you produced in within your country? Okay. How many things produced within the country yet? Okay. And it's a measure of like living standards rarely. Yeah so how well people are living, we can argue about this if we if it truly measures how you and I are living and if we have a better quality of life. So if GDP doubles, Rory, can we say that the average person is twice as better off, lives twice as better, they are twice as happy. What do you think? Not necessarily because it could be like produced by the foreign companies and most of the profits are being taken away from pp. I think GDP per p, like GDP, ppp or a gross domestic income gesorry gross national income, these can reflect how people live instead of the dp GDP, nominal GDP. Okay, so you mentioned ppp, right? So this is like the evaluation point, right? What's ppp? Can you elaborate on that? Pvp is. When you get rid of the rate the exchange rate of dollars, okay, Yeah. Okay okay, who's sir? This is correct. So basically the idea is that it's not too much about if my GDP doubles from ten to 20. It's what pp, the pvp argument is basically the $1 in the us. So let's say 10000GDP, let's say per capita, right? It's not the same as 10000GDP per capita in China, right? Why not $10000 in British country? Because the exchange rate is different. Well, yes, let's assume the $10000 in China gets transferred at the exchange rate, the appropriate exchange rate, into R and b. So you can use the ten, zero dollars to buy things again in China. But why is it not the same? So let's say the 10000, maybe we can do this example here. So ten k usd, and let's say usd, R and b is or it must be around seven at the moment. I imagine more or less it use tends to be around seven more or less again. So let's say tanki usd GDP per capita, okay, this is the headline number in the us on average people are making $10000a year. Okay. Cto be per capita, let's say $1 is CN¥7, okay, then this means how much how many R mb does that? Is it equivalent to. Farm seven. Yeah okay. So how much. I get. One in times seven that's like. But basically, okay, it's like 70. Wait, no. Well, is it 20k? You mean R and b or 20k dollars? I'm here, I'm here, I'm here. So here you see where I'm here, not 20, ten, ten. So it's ten k. You can see what I've drawn, right? As a rectangular, Yeah, Yeah. So ten k usd is how much in R and b? Basically, that's my question. Oh, it's not the 770k, right? Yeah, just ten times seven, right? Yeah, Yeah. So it's 70K R and b, right? Let's say Yeah per capita obviously per capita doesn't mean you meal will be 70k per year. It's kind of like GDP over population more or less gives this idea that people are kind of contribute on making 70a year. Okay? Okay. Is 70k the same? 70k rmb the same? So 70K Rand b in China, the same ten k dollars in the us, does it buy the same amount of things, the same stuff? I would say, Yeah 70k 70k rmb and ten k dollars. They buy the the same similar thing or even China can buy more with the 70k. What do you think? More or the same more more in China can buy more than San city? K, Yeah. Like when you go to China, right? I mean when I I'm going actually next Thursday, if you have, I really Yeah Yeah I'm going to Kunming, actually flying to Kunming from Spain. Yeah and then I'm actually then going to Shanghai. Yeah a bit of a traveler south and you know, I am going somewhere as well. That's such a coincidence. Are you next week? No, no, no. I'm going not not going China. I'm going Budapest. I used to live in Budapest. Oh, but you mean like you mean like in the south? You live in the south of China? No, no, no. I mean like I'm going some, I'm going abroad today as well. I'm going it Oh you're going abroad, okay. Budapeoh peokay Budapest. Okay, sorry, sorry. Oh okay, I'm going next Thursday, next Thursday to flying to Shanghai and then straight to Kunming and then go back to Kunming to Shanghai for a few days. Okay. Yeah. So it's clear that with CN¥1000 or whatever rmb, right? A thousand, let's say CN¥700 which is $100, right? CN¥700 in China buys quite a lot of things. And this is obvious when you know when you walk on the street, it just gets you more things right Yeah than the equivalent in the us. There's something called the Big Mac index. I don't know if you've heard of this. This is it also in the syllabus. Have you heard of it? No, you know what? Okay. But you know what the big Macc is, right? Yeah. McDonald, Trent, Yeah. Okay. So how much is a Big Mac that you k, how much is a Big Mac more or less? I actually don't know. But how much more or less do you think? I don't know. That's six, seven pounds. Yeah could be so let's say seven pounds. Okay, how much do you think it is in China? I actually don't know, but more or less five pounds. I think in China it's like the 34 pounds. 34 pounds. Okay, so basically 34 pounds in R mb, so let's say four times. So maybe like close to maybe CN¥35, right? More or less Yeah or bit let 8030 even though it's 25 to the 45 voli don't know just I think 35 but you know you know got ffeeling like in China, I 35 quit's actually a lot of money. You don't even want to spend that much money. But after you come after come to uk like three pounds that's so cheap, like nothing is exactly enough Yeah Yeah so three, four pounds just saying like imagine it four pounds. Let's see, it's like CN¥30, right? But let's say the clips so it's three, four pounds if we switch to pounds, right? So clearly for even forget, let's just talk about in pounds. Seven pounds of uk buys you a Big Mac. Four pounds in China buys you a Big Mac. So half the money buys you the same thing. And Roy, can we assume the Big Mac is the same in China and in the uk. Yeah Yeah, Yeah, I think so, right? You think it's a fair assumption, right? Yeah, it's everywhere the same basically, right? Exactly. It's the same. I mean, in India actually, it's, I think it's a pork medle chicken because they don't eat beef. And I believe in some other countries it's halal al in in Arab countries, right? Because they need this special type of meat, whatever, but well, this blessing or prayer, but it's basically the same. So it's very, this is a very good index designed by the economists, the magazine. This just seems a bit silly, right, talking about Big Macs. But what it's trying to do is a bit deeper. It's trying to understand how much a dollar gets you in different countries, right? And clearly, $1 in China gets you more than $1 in the uk or the us ring. So this is the ppp question. This is the classic thing that gets taught in a level economics when we mentioned ppp, which was the original point ring. So can you enrich your ppp point using what we just discussed? So why have we discussed this Big Mac example? Why have I spoken to bmcdonald's when trying to illustrate ppp? Well, what was my idea, do you think, say that how much people can actually buy with the money? So it comes down to what ten k GDP per capita in the uk is not the same as ten k pounds in China. It doesn't buy the same things to mright. Yeah. So this is a bit deeper and it goes, okay, when you think about GDP, Rory, we think about standardized, let's say in dollars or in it's just in the same currency all the time, right? We want to think about one currency, right? Yeah. And the point is, and this is a critique, an evaluation point, classic evaluation point for GDP in all a level textbooks is 10000 or x dollars. GDP or GDP per capita does not buy the same stuff in one country versus another. Okay. Yeah Yeah. So I think pvp when it comes to pp, America is still the same. I've checked it on Wikipedia. America is always like the same and but China is like two times more than the GDP per capita nominal like GDP ppp per capita. Okay. So what what have they done implicitly? What does the double thing? Why is this relevant? I agree, but why is this relevant that. It's very relevant, but why have they discussed this? Well, why is this as a thing? Why do we care about ppp? Like okay, fine, more stuff can be bought in China with the same amount. But what's the what I'm trying to ask you rries, why are we discussing? Why is this important there? Why do we worry about this? PaaS. I said, why why would it? I don't know though. Sorry. Okay. But so why are we worrying about ppp later? Fine, we can get more, we can buy more stuff, right? We have a high living standard with ten k dollars in China than ten k dollars in the us, right? But why do we care about this? Fair enough. Like why why is this relevant? But when we think about evaluating if GDP is a good measure of living standards. Because this is the question, right? This is the question we want to value. You can see this, right? Yeah. I don't know, like not necessarily, I wouldn't say so. But okay. So taking the ppp point, taking the ppp point, like one point is the ppp. Can you answer this question? Is GDP good to measure living standards or happiness using the ppp argument? Yeah. Well, ppp is a good example, but GDP, a nominal GDP is not really good, not really a good example. So because like countries using a more expensive currency or us us dollars in general have more way more advantage. So that's why can you can you simplify your point? So you're saying it's not a good measure across countries, right? If we compare different countries, right? Yeah, okay. Why why why why isn't it a good measure if we want to compare living standards in China versus the us? Because in India the there's exchange rates and obviously in China you can buy more things with this with the same amount of money. So exactly that. Yeah, that's good. Basically, it's just rearranging your wording to make it like an evaluation point specifically, right? So you understand maybe kepers, how can we apply this concept to answering the question basically, right? And forget about exchange rates. Like exchange rates, yes, exist like $1 might be CN¥100, or it might be a thousand rmbb, might be CN¥5, right? That that doesn't really matter. What matters is that once we've done the exchange rate, whatever we're left with does not buy you the same amount, right? That's basically the main point, right? For sure. This exchange rate in the middle, right? Okay. So is GDP a good measure of living standard slash happiness? No, if we want to compare across countries, because if we standardize into dollars or whatever currency, it doesn't mean to have to be dollars. $1 does not buy the same in different countries. So it's very hard to compare, right? So in summary, ppp or let's say different. 啊。Does this make sense? Yeah, Yeah. Okay. I just want to make it very clear. Okay, that's good. Fine. What's another evaluation point, Rory? Something similar, another easy kind of classic easy critique of GDP in a level. Another way. Hwell was always a different one. I just dude, if you do imagine offsder lisun's happiness. So we've got the first one. No, I can't think of another one. Okay, wait, maybe text. Sorry. Maybe. Yeah. No sorry it took it but. There's a few others that are very textbook oky. Have you heard the greay economy? That a buno no, no, no, the gray or let's say the black economy or the informal economy as a concerept. Well, cash in hand cash in hand, invisible hands I've heard. Okay No Okay. So I don't know if you depends, have employee clean a home or they might pay a plumber to fix something every so often or these different things, right? Maybe Yeah okay, how do you pay them you just send them you pay them money and cash or you send them a little bank transfer quick transfer on whatever app or in China just a quick ally pay or whatever, right? Wait, is this counted towards GDP? Yeah. Do you think so it is right? Yeah, definitely. How is it counted? Every transaction has, has, has been recorded, I assume, how do you count GDP? What is it? How do we count GDP then? What is it? What is it numerically is the sum of what. This this suof the sum of purchase, the sum of consumption in a country I get conceptually, it's going to be more or less similar. So if you spend more, Yeah you expect a GDP to be higher, but it's not exactly the sum of, let's say, consumption. Let's say how many times you Press, you tap, your bank cut, right? How much money you've spent. It's not exactly that. Okay. So there's three ways of measuring GDP. The spending method, okay, which is 80. So consumption investment, government spending x minus seven, again, the output method. The output output Yeah the output method is basically every country produces goods, right? Whether it's for domestic consumption or exporting, how much do they sell for? Okay, that's the output to generated stuff. How much the country generates in terms of produce renroyeah physical, let's say produce like like they've they've built a car back car is worth 30000 pounds. That counts towards gp those 30000 pounds. Then the final one is the income method. Okay? So in theory, if you pay a cleaner 15 pounds an hour or I don't know whatever it is, okay, that should count towards GDP. Every hour they work as 15 pounds more in the income method, it's their income. How much income has been generated with. Yeah, okay, fine. However, Rory for the you're saying if if I spend 15 pounds as a bank transfer to a cleaner, is that counted somewhere? Not in the output of method and then in the income method, in theory it is income, but it's not declared, it's not taxed, right? It's informal, right? This happens when all people do this. It's very common, right? And spending I mean theory to spending, but I don't think bank transfers are included, right? So my point is this informal economy or greay economy is quite prevalent in some countries more than others, right? Especially in poorer countries. Okay? And this is not counted in GDP because it's informal. It's if I take money out of my bank account like cash and I pay you Rory for a service, this is not counted. You don't declare this income. Most people won't declare this income, right? Does that make sense? Yeah, okay. Why is this an issue when thinking about GDP and measuring GDP then, Rory? Because. Lots of people don't have and not Everest transaction being recorded. So there are lots of flat black markets and stuff. So that makes hard to count the real GDP because lots of people, they just spend the money privately in the market and lots of transactions made by a mate like this and you can never trace them back. And so hence, if there is whatever degree of informal economy, so if there is, let's say, a big informal economy, it doesn't not if there is any informal economy, is official GDP data or is the official. Give this a think. Okay. Well, we give this a few seconds. If there is a big informal economy in whatever country is the official GDP number an over or underestimate of GDP? Yeah, this is important conceptually to understand this again. I think it's an underestimate of GDP. No. It's an underestimate of GDP. Yeah Yeah okay. Why I agree it's an underestimate yebecause. There are black markers as you said I'd not every money transaction is counted and not only black market but some of the daily corner shop purchase as being ignored as well in some ways. Yeah. I mean, so long as it's not declared to the tax authorities, it never happened. I lack the knowledge of whether like if you pay cash to the corner shop person for a pack of crisps, if team is not, he is not declaring the income but he is perhaps paid suppliers to buy the pack of clips and he's then spending the money elsewhere. So it is somehow going through the system some degree but it's not being fully counted at the point of purchase, right? So Yeah, also it's these are very legal themes, right? Like you're going to work in a corner don shop, you can be a cleaner. But if it's not declared, it's much it's just at least that transaction is does not fully not fully represented in GDP, right? Right. Yeah. So do you think this is an issue for certain countries or for us thinking about growth in different countries? Or is this just kind of like it happens but doesn't really matter ssive for GDP or does even matter for the economy to have a lot of a black market? But black market, my point is, does it blackhole and formal? These are different, same, same names. Black market is it's not really mentioned anymore. It's basically, it used to be called the black market, but black everything, you know, it's a bit racially, racial connotation, but it's just the name that was given. It's still used, right? It just to means the great economy and formal economy. So does the informal economy pose any issues? There's many different types of issues, but does the mal economy pose any issues? This is my question, right? Does the formal economy pose any issues? Issues? Yeah, but it's illegal. So it does post a lot of issues. I think, Hey, what kind? Illegal issues like guns and jobs. So that's another thing. Like that's illegal, illegal activities, that's like selling stuff that's illegal, right? Obviously that won't be declared, right? You can't say, Oh, I sold you a gun, I wanna pay a tax on it, right? Yeah, isn't it's illegal, but it's always gonna to be under this, under the radar, right? So think of things that are legal. So whatever that's legal, like someone coming to my house to clean my house, that's legal. But the transaction happens between us to inform more in I'm asking about this, me not declaring how much I paid or how much the person that comes, they don't them not declaring their income. Is this an issue? And your question should be an issue to whom? But yes, that's a good question. But is this an issue as a whole? I wanna give it away. But is this an issue for the country? That's it. The gp measures? No, it's small issues. It's not like that. Huge issues is not that huge, okay? But let's say it happens across the whole country all the time for a lot of different activity. What do you think, roory? Thank you. Well, it's the big issues. I can't think of it just obviously, China is a bit country ary and it's not, it's got a lot of things going on. So I don't think missing one GDP, I mean, missing few like this money being, I don't know, I don't think mispounts a few monies that would cause that much problems in in China. So I wouldn't think it would pose any issues in China, but I don't know about the smaller countries though. But at least in China or the uk with bigger economies, the countries with bigger economies tend not to have these issues that let's say 30% of business activity is informal, okay? This means the country is not being able to tax 30% of business activity. Is this an issue? Oh, that's an issue because the governments will not be able to collect that much money then exactly at that. Yeah. So you could that potentially be a big issue? Like potentially couldn't potentially be an issue? Yeah, obviously. Yeah, it's informal economy is bigger. It's a big issue, right? If it's a bit small, like in most developed countries, look, if you pay your cleaner under like in cash, doesn't really mati mean most people do it really. You know, there's also other things that are bad about it. Another thing that's bad Rorian, that's what's more important for our purposes is simply saying, okay, 10000GDP in the uk in dollars, or is not the same as ten, zero dollars. Let's say $10000 in the us is not the same as ten, zero dollars in an African country where the informal economy is 50% of business activity. Okay? Why think of a very poor country where 50% of GDP, of GDP is informal. And then I tell you, the official number is ten, zero. What does this mean? Great. It says GDP is supposed to be like double of the size, but. Okay. So official gp. No, I'm saying I'm saying like the actual GDP, the actual gross GDP is supposed to be doubled off the chlorine GDP figure. But since there are 50% of the business not being countered in the economy, 50% of the business, it's great economy, that means it's supposed to it's got potential, but it's not performing very well on papers. That's not it's performing or not. It's just not recording it's a question of recording, right? Yeah if we lose recordings of this lesson, it did happen but it doesn't hasn't happened according to on paper, right? It's just we lost the paper recording or the online recording or class syright, it just didn't happen, right? Does that make but it still happened physically. Well we remember it happened, right? And you got a service, I delivered a service if you think of it this way, right? Okay, and it should be counted right towards the recording on class and at least right? Okay. Okay. Cool. So this is correct. Right? You're right. It should be six k. Yeah the GDP would actually represent real business activity. Okay, very good. This is good. So these are issues. This first issue was pp. It's hard to compare across countries, right? 10000 is not the same here as it is as it is in hunsecond this informal economy, right? Which makes it very difficult again, to compare across countries or measure growth in one country in particular, because unfortunately in some countries the informal economy is very big and in other countries it's very small, so it's hard to compare, right? Yeah. Okay. We've talked a little decent amount about GDP per capita. Okay, right. Let me share a picture. Okay. Let me share my screen. Not sharing right now. Yeah Yeah we'll seconds. Okay, can you see my high screen am. Yeah, okay, this goes, this is GDP of my country of Spain, right? In current prices, forget current prices, whatever dollars, it's actually in dollars but it's in trillion. So this is in 2030 it's two comma three, eight, zero zero two. This means 2.3 trillion or 2000 380 billion in but anyway it's going up, right? The GDP in spins going up since 1980 till night 2030, right? Is an upwards trend. Do you agree? Right? Yeah, Yeah. Okay. So obviously it's an estimate beyond this year or beyond 20, 24 or I guess 20, 25 is still an estimate because it's not really being calculated yet. I imagine maybe or sixth I've just jacked maybe but everything from here to the right is s an estimate but it seems to be pointing up at least we've been going up from 2015, right, which is more or less, let's say the trough to 20, 25, right? It's been going up, right, a decent amount, it's going up like this, right? Do you see that? Yeah, keeps going up more or less a little bit. The bses are pointing up with riokay. This is GDP going up. I want you to critique the my statement Rory. Okay, my statement is the follow. Listen up again. Living standards in Spain have gone up from 2015 to 2020 five because GDP has gone up. So let me deltwenty 15. It's 1.2 trillion, right? Yeah, you can see the number Bering, you can see that from 20 you can see the number, right? One, two, six point, okay, to 2025, one commeight nine, okay. So it's gone up from 1.2 to 1.83. So quite a lot of 50% almost, right? Yeah, this gives evidence that living standards in Spain have gone up by 50%. Critique my statement ruory from Yeah from top to 1 million to 1.21 from what? Yeah, that is 1.2 to 1.8. It's basically 50% more. And I'm saying, yes. This tells me that living standards in Spain have gone up by 50%. Critique my statement. Yeah, that's correct. Increase by 50%. So lot, yes, but I'm making an assumption here. I'm saying critique my statement. And my statement is the following. Living standards have gone up by 50%. Not necessarily because you could be just inflation and you don't read it necessarily, right? Yeah could be just inflation, but you don't buy a lot of things. You know what I mean? You cannot actually buy a lot. You mentioned inflation, and that's always something that you should adjust for. Actually, current prices, adjuthis term here is referring to that's been adjusted for inflation. Okay. But I agree, inflation we should take a look at, but in this case, it's been accounted for. Okay. So it's not inflation. What about something else you're on the right tracks of like playing devil's advocate, you're on the right track. Ks kit, anything else? Inflation. Maintain. This is a GDP graph. I mentioned living standards. Does that ring an alarm? An alarm bell feet? I don't know, because inflation seems like the only one I can think of right now. So my steam in this because GDP has gone up, let me rephrase, if GDP because GDP has gone up by 50%, and this is unquestioned, it's in the graph, right? If GDP has gone up by 50%, this means living standards have gone up by 50%. No, that's definitely not. But I can't. I don't I don't know the reason right now. Give me give me reasons I'm not asking for about spying. Just hypothetically, why does why is this an incorrect statement? Always whether there's Spain on the graph or China or Somalia. What would irk to with my statement, forget inflation, forget inflation, forget inflation, forget inflation would irk to on our repeated a 50% increase in GDP means living standards have also gone up by 50%. Yeah. Is this correct? That's not it's not necessarily correct. It's half off. Definitely. It's definitely improved. But it might be the estate control company and they got nothing to relate and they got nothing related to people's daily life. It could be foreign companies. Foreign producing within the county or hdr investment in that country. But the most of the profits are being taken by the by the more developed countries. So it might leave Yeah, it might leave nothing. Ireland is a really good example. Ireland has got really high GDP per capita, but actually the Irish Lewis thder is actually better than London. Is it actually better than Germany? I doubt there. Okay. So now one makes it so you mentioned gper capita. This is GDP and that's another that's another thing. Okay, so let's wrap this point up. You've made some a good observand. This is really what I wanted you to do in all the lessons. Again, play devil's advocate, economics is it's at least a level. It's about being a detective and it's always the same. It's about criticizing things. Okay. And that the following critique is raising. This is GDP, not GDP per capita. This means that if there's more immigrants coming in, there's more GDP, right? In theory, this is very simple to understand. There's more people to produce goods in the factory basically, right? There's more babies being born. GDP would go up quite quickly in the next few years, right, in the next 20, 30 years, right? Yeah. So why is this a bad measure of living standards just because of this point? Why? I've given it a way. It's. Because. Oh, asynchence prices, forget current prices, forget inflation, really concentrate on GDP. Why is a big GDP that's growing a lot not representative of what you were doing? How would your living standards are, especially with all basic immigrants coming in? Oh, is the immigrants making up a lot of like GDP and it doesn't, it will be getting nothing related to me then. It's not so much that the immigrants in not you, it's just GDP goes up if lots of people come in, right? Why does China have a very high GDP? High population? Yeah. Basically China having a very high GDP means clearly there's some activity there, but it doesn't mean it has higher living standards than Switzerland that has a much lower GDP. Why not. Because to be in China, you can buy more things without money. But in Switzerland, it's very simple. I need to contrary for a second. If GDP is massive in China, which it is, it's much bigger than that of Switzerland. Why is it also, why is it the fallacy to say living standards are higher in China than in Switzerland? Oh, but because when it comes to GDP per capita, that makes GDP. I'm referring to GDP, not GDP per capita GDP like in the group GDP, there are more people in China. So that's why exactly it's not shared by more people. Easy, right? Exactly. There's more people. Yeah so there's a million people in the country and then there's 15 billion people in China. You expect China to have a higher GDP, right? It's easy to think about this this way, right? Okay. So if this graph row in, please look at the graph for a second. It measures GDP again, not GDP per capita. Hence my point is if GDP has gone up by 50% in Spain from 2015 to 2020 four, 2025, does this represent a living standard? Why not, Rory? It's the same point about people because our population has increased, immigration coming Yeah, exactly. We just don't know what happened to the population or immigration coming in and out, right? So yes, if GDP has gone up by 50%, it's likely people are better off, people are happy to make more money, but we don't know because we don't know number of people. And this is an equation that's very easy to understand and maybe which is a kind of centry on this, it's GDP. Per capita equals GDP over population this is very simple you've seen this equation before very you've seen it Yeah because it has us how you calculate GDP of carpenter Yeah living standard is it closely related to GDP per capita or GDP what do you think it's closely related to GDP per capita, right? Why is it more closely related to GDP per capita than just regular per person? Exactly. Exactly. So it's just mathematically, my question, Rory, was the following. It was if GDP goes up in the numerator, my point was the following. Does this mean GDP per capita has also gone up by the same amount? No, because population could have also grown. Does that mean it's just a mathematical thing, right? It was a hidden variable. My question was a trick question. It was basically a hidden variable, which is population. We don't know what happened to population, right? Yeah, no way. So there's just two things that I didn't mention on purpose, right? GDP per capita, it's basically the same thing as living standards, and I didn't mention population. Okay? So my point, Rory, is if we want to be critical about GDP, and this is a classic, super simple a level type of question, GDP does not measure informal economy, okay? GDP can be distorted because of purchasing power parity or purchasing power differences across countries. GDP does not measure living standards, okay? We don't even if GDP goes up, we don't know maybe law of population or population growth, whatever, okay? Fertility rates, mortality rates depends on a lot of these demographic issues. The next thing is basically the same. It's what's a better measure GDP per capita, right, than GDP? You would assume GDP per capita is better than GDP rrc to measure living standards. Yeah. If it's per person, as you mentioned, that's quite right. Okay. Okay, these are some very easy evaluation points, okay? They should make be critical of GDP, okay? Also we don't know through generating with this GDP we polluted rivers, we polluted farmland, we polluted the air, we don't know, right? Rory, there's a lot of other ramifications from output growth and GDP growth. Yeah what am I referring to? Which traoff am I referring to here with regards to pollution which trade off. So wedge trader, I refer to sustainability that even if we have higher GDP, it doesn't mean we're better off. You and I at Rory rate, we might be better on paper, but with polluted rivers to get generate that out to make those products we've polluted drinking water, farmland, the air that we breathe, it's lost. Smug, right? What trade off is this? What am I referring to? We are referring to pollution, the sustainability as a whole. I mean, like isn't an output growth? Yes. Sustainable comes at the consequence of polluting rivers. Maybe it's not worth it. This is something that's being talked a lot about in China, for example, right? You've heard of this. What is this argument that I'm referring to in China? What kind of stuff is always on the news based on in western news? Pollution? Like what was pollution, pollution, pollution in China? Yeah, that is that China is growing very fast, but a consequence of polluting rivers. Et cec, okay, Yeah. Okay. So these are the types of arguments you should generate already. They're very simple, okay? Just being critical of GDP and then thinking about, okay, GDP per capita, maybe that's a better measure of a living standard. And just be playing devil's advocate. It's very simple, okay? Yeah. Okay. So I wanted to kind of engage in this way in the future. Okay, okay, okay, cool. Do you have any questions Rory me no, no, no not really. I think I understand that. Thank you. Okay, okay so see you on Sunday again no I can't do a lesson on Sunday but my my parents will talk because I'm going Budapest. I have a can can you tell them please can you tell them they know they know they're gonna they're gonna to message the agency. Okay, cool okay, okay we'll see you next week then let me know when bye rhave a good time in Budapest. Thank you. Have a good having chance. Thank bye. See you.