WRITTEN QUESTION E-1551/00 by Paulo Casaca (PSE) to the Commission. Validity of the application of purchasing power parity (PPP).
Date: 2000-05-18
Institutions: European Parliament, Provisional data
Subjects: EU act, Portugal, purchasing power parity

6.3.2001

EN

Official Journal of the European Communities

C 72 E/75

(2001/C 72 E/088)

WRITTEN QUESTION E-1551/00

by Paulo Casaca (PSE) to the Commission

(18 May 2000)

Subject: Validity of the application of purchasing power parity (PPP)

In its reply to Written Question E-0275/00 (1) the Commission stated that, with reference to the meeting of
the working party on PPPs held in Luxembourg on 21 and 22 June 1999, (cid:145)neither during this meeting in
Luxembourg, nor after the meeting, did the Portuguese delegation make any statement (or complaint) on
the validity of PPPs and their use in Community regulations(cid:146).

Nevertheless, the Commission makes no reference to statements and complaints made before the meeting.
Is it not
the Portuguese national statistical authorities questioned
(cid:145)the validity of PPPs and their use in Community regulations(cid:146)?

the case that, on 5 May 1998,

Is it not the case that the Luxembourg meeting of the working party on PPPs did not result in any
significant changes to the situation and that, consequently, the Portuguese authorities did not express any
change of opinion on the matter?

(1) OJ C 303 E, 24.10.2000, p. 169.

Answer given by Mr Solbes Mira on behalf of the Commission

(10 July 2000)

Despite detailed investigation, it has not been possible to find any trace of such a statement which the
Honourable Member claims to have been made by the Portuguese national statistical authorities.

(2001/C 72 E/089)

WRITTEN QUESTION E-1553/00

by Paulo Casaca (PSE) to the Commission

(18 May 2000)

Subject: Market prices and values

In its reply to Written Question E-0273/00 (1) the Commission appears to be confusing two different
phenomena: the existence of price differences resulting from administrative and/or macroeconomic policy
measures, generally considered on the basis of the classic text (cid:145)The Purchasing Power of Money(cid:146) by Irving
Fisher, and differences in market value for equal or similar goods and services arising from differences in
supply and/or demand best summed up by John Maynard Keynes.

Keynes quotes Dr Watson on a visit to the Isle of Skye, when he says (and I quote from memory) that, if
the eggs on your miserable island are cheap, it is not because there is an abundance of eggs but because
money is scarce.

The problem posed here is impossible to resolve in the context of statistical method, because it belongs to
the field of economic theory.

As conceived by Fisher, PPPs represent the appropriate method for looking beyond price differences which
do not stem from market mechanisms, which is not the case when the market itself attaches different
values to goods.

As Dr Watson realised using his own common sense, the value of goods and services varies not only
according to conditions of supply but also according to conditions of demand, especially where their
mobility is low.

That being so, does the Commission not consider it absurd to correct the overall income of a particular
geographical area using the assumed market value of goods and services in that area, to the extent that
possible differences in prices do not reflect administrative measures?