Is it really that much more expensive to live in London versus Los Angeles?

Politics, economics and baseball are full of numbers constructed from other numbers.  Whether we’re talking about partisan polarization, GDP, or the earned run average, it can help to look inside to see how these numbers are created.

Here’s an example which I came across in the blog of Jon M, who in January 2014 wrote:

An interesting project has been popping up on my news feed today. It’s a new tool from expatistan comparing the cost of living in different cities (mainly from the perspective of the footloose professional class).

Comparing the two cities I [Jon] have lived in most recently gave an interesting result:

The site says that it’s designed as a tool to help you decide between different job offers around the world. You know your potential salaries and want to know which will give you a better standard of living.
The standout category in this comparison is transportation with Los Angeles 54% cheaper than London.
This is calculated by taking the average percentage difference to buy a:
  • Volkswagen Golf 2.0 TDI 140 CV 6 vel. (or equivalent), with no extras, new
  • 1 liter (1/4 gallon) of gas
  • Monthly ticket public transport
  • Taxi trip on a business day, basic tariff, 8 Km. (5 miles)
The car in London is actually 10% cheaper than in Los Angeles. However, London’s petrol/gas is 55% more expensive. This is a fair point and reflects the much higher fuel tax in the UK.
However, the monthly ticket on public transport is where the difference really kicks in. LA’s monthly ticket comes out as the equivalent of £41 compared with £127 for London’s.
But that difference isn’t the arbitrary choice of Transport for London. It actually represents the best reason to prefer London to LA. In most of London you can take public transport anywhere in fairly little time. Spending £127 means that you don’t need to buy a Volkswagen Golf or a liter of gas at all. It’s rarely worth owning a car if you live in central London.
In LA, public transport is simply not a substitute for car ownership. The £41 doesn’t pay for anywhere near as much transport in LA.
And that’s not even getting into the largest single expense for many US household: healthcare.
Also, new cars are for suckers. And a 5-mile trip will get you a more places in London than in sprawling L.A.
It gets worse, though.  I hadn’t heard of the site that Jon had linked to, so I went and checked it out yesterday.  I typed in London and Los Angeles, and here’s what I got:

Whoa! That 54% gap in transportation costs has changed to 137%. Let’s zoom in:


A perhaps more useful cost of living calculator is here at CNN Money, for example:


But I can’t try the London/LA comparison because CNN’s calculator only has U.S. cities.

Googling also turned up this from Numbeo.com (whatever that is) but when I did London vs. L.A., it revealed the same problems as the form that Jon M. criticized: it includes a 1 km taxi ride (?) and again that Volkswagen Golf (??) but nothing on health care.

There’s a lot of stuff out there. Here’s the first page on Google:

Screen Shot 2014-08-24 at 10.44.04 AM

General thoughts

What general conclusions can we draw from all this? Most obviously, don’t trust a calculator just because it has a nice name, a cool map or a fancy Web site. Remember that goofy “human development index” of U.S. states?

Another cue is variation over time. If the difference between two cities changes so much in just a few months, that’s a sign that something could be wrong with your measure.

Finally, cost of living is just inherently tricky, as are related quantities such as GDP (see here for an example). So be careful!

Andrew Gelman is a professor of statistics and political science at Columbia University. His books include Bayesian Data Analysis; Teaching Statistics: A Bag of Tricks; and Red State, Blue State, Rich State, Poor State: Why Americans Vote the Way They Do.
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