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The Economist publishes a fun and simple metric called the Big Mac Index. They present it as a way of looking at forex rates. If 1 USD buys you 1 swiss franc,

The Economist publishes a fun and simple metric called the Big Mac Index. They present it as a way of looking at forex rates. If 1 USD buys you 1 swiss franc, but a Big Mac costs $5 here and 7 CHF there, then maybe the franc is overvalued. In any case you lose McDonald's purchasing power by converting. But you could just as easily use it for inflation. Big Macs are a stable product. A Big Mac sold in 1985 is very similar to one sold yesterday. Also, it includes a good mix of basic inputs. Land rents, transport costs, labor, and food ingredients. Here's the raw data. https://raw.githubusercontent.com/TheEconomist/big-mac-data/master/source-data/big-mac-source-data.csv https://raw.githubusercontent.com/TheEconomist/big-mac-data/... In the US, a Big Mac cost $2.54 in 2001 and $5.65 in 2021. That works out to 4.0% annual inflation. https://www.google.com/search?q=(5.65%2F2.54)%5E(1%2F20)&oq=(5.65%2F2.54)%5E(1%2F20) https://www.google.com/search?q=(5.65%2F2.54)%5E(1%2F20)&oq=... The official numbers were 2% that entire time. Those come from a complex calculation using an always-shifting basket.

Galaxeblaffer 5y ago
The Big Mac index is pretty stupid though, since the ingredients in various countries are different and not sourced from the same place. Here en Europe McD tries to be somewhat middle class while I'm the us it's absolute trash.
- herbst 5y ago
  Was going to say that. They have a green logo and regularly claim some of their products are hyper local now here in CH. I doubt they have to do this in many other countries. Other than that price differences in food between $ and CHF are likely mostly explained because work hours simply cost a lot more around here.
  - ehnto 5y ago
    > I doubt they have to do this in many other countries. Not sure why you would think that. McDonalds is famous for catering it's menu and service to it's locale. In Australia they were required to serve real chicken in their nuggets, and they're always advertising that they use locally sourced beef for their burgers. They also rebranded in a sense to upmarket themselves, and started selling salads, cakes and coffees in order to sneak a foot into the Australian cafe scene.
    - christophilus 5y ago
      > McDonalds is famous for catering it's menu and service to it's locale. Hence, it’s a non standard product, and a pretty dumb basis for an index.
      - goodcanadian 5y ago
        It was never intended to be taken seriously. The reason that it is taken somewhat seriously is because it turns out to be a much more reliable indicator than you might naively expect. That said, no one truly relies on it for anything more than a rough indication.
      - taylorius 5y ago
        Dumb compared to what? A basket of goods curated by a government who have a vested interest in getting certain numbers out of the formula?
    - bartedinburgh 5y ago
      What do you mean by real chicken? What are McNuggets made of in the US? I saw Americans amazed at Europe’s “real cheese”, and Coca-Cola with “real sugar”. I have never heard the explanation for “real chicken” yet. This is funny and scary at the same time.
      - ehnto 5y ago
        I believe the ingredients were always different due to Australia's "Allowed Substances" list and local ingredients availability. Similar to the controversy over "Pink Slime" for their beef patties never being an issue here, because the substance was already banned. USA (according to https://www.mcdonalds.com/us/en-us/product/chicken-mcnuggets-4-piece.html https://www.mcdonalds.com/us/en-us/product/chicken-mcnuggets... ) : Ingredients: White Boneless Chicken, Water, Vegetable Oil (canola Oil, Corn Oil, Soybean Oil, Hydrogenated Soybean Oil), Enriched Flour (bleached Wheat Flour, Niacin, Reduced Iron, Thiamine Mononitrate, Riboflavin, Folic Acid), Bleached Wheat Flour, Yellow Corn Flour, Vegetable Starch (modified Corn, Wheat, Rice, Pea, Corn), Salt, Leavening (baking Soda, Sodium Aluminum Phosphate, Sodium Acid Pyrophosphate, Calcium Lactate, Monocalcium Phosphate), Spices, Yeast Extract, Lemon Juice Solids, Dextrose, Natural Flavors. Australia (according to the PDFs here https://mcdonalds.com.au/maccas-food/nutrition https://mcdonalds.com.au/maccas-food/nutrition ): Ingredients: Chicken, Water, Flour (Wheat, Corn), Canola Oil, Starch (1420, 1422, Corn, Wheat, Tapioca), Mineral Salts (450, 500, 451, 341, 327), Salt, Spices (Celery, White Pepper, Black Pepper), Sunflower Oil, Dextrose.
  - lugged 5y ago
    Lol, McDonald's is "locally sourced" everywhere. It's been in their branding strategy for the last ten or so years.
    - herbst 5y ago
      I honestly had no idea, I just noticed the logo being not green in the surrounding countries. I haven't put a foot in any of their stores for over 15 years now
janandonly 5y ago
Big Mac's have gotten smaller though. So even there is an example of shrink-flation...
- rightbyte 5y ago
  Really? I thought it was becouse I was a kid and smaller myself.
xxs 5y ago
Big Mac depends on the popularity of MacDonalds which is incomparably higher the US than most of the EU (or Switzerland). MacDonalds is just not popular and as sibling Galaxeblaffer mentioned it's not directly targeted as a lower class restaurant. In most places/countries I have seen Big Mac are not even advertised. Some of the local regulations would prevent the same Big Mac prepared, either.
roenxi 5y ago
Although if we assume any technological progress in the last 35 years a big mac should probably have gotten a little bit cheaper. So the impact of inflation-causing-forces (aka, the reserve banks) is probably higher than 4%.
- mr_toad 5y ago
  Technological progress in hamburger making? It’s meat between bread. There’s only so much progress you can make. What keeps the CPI down is technological progress in other goods, like cars and TVs.
  - roenxi 5y ago
    It isn't my area, but something called "Total Factor Productivity" is up around +50% since 1985 [0]. There are a lot of ways to make things cheaper. The world has seen startling progress in logistics, organisation, science and tech in the last 30 years. Some of that is applicable to gathering food more cheaply. I suppose maybe all the gains could have been eaten up (heh heh) by population growth. The underlying equilibrium here isn't static, at any rate. The real price of a hamburger will not be steady. [0] https://www.ers.usda.gov/data-products/agricultural-productivity-in-the-us https://www.ers.usda.gov/data-products/agricultural-producti...
    - extra88 5y ago
      Part of the logistics improvements over the decades is "just-in-time" delivery at multiple stages, from raw materials to store delivery. The pandemic knocked that out of whack resulting in supply chain issues. The cost of mitigating that in the short term and longer term undoing some of the over-optimization for efficiency at the expense of robustness will be passed on to the consumer.
  - alanbernstein 5y ago
    McDonald's was one of the prototypes of the fast food industry. There was absolutely technological progress in food preparation to be made when they did that. It seems silly to assume they wouldn't keep that up.
emn13 5y ago
They also regularly reiterate that the index is meant partially in jest, and that you shouldn't expect it to generalize in any kind of highly accurate way. Also, the leap from forex to inflation is a big one; AFAIK they haven't argued the data is valid to use as you are here, which is different from judging exchange rates (it must surely be normal for various kinds of goods and services to inflate differently, right?). They simply point out that it works surprisingly well for something so simple. Even assuming the 2% numbers are more representative of the average household, the 4% big mac number sounds entirely consistent with that. TL;DR: this is interesting, but I don't see how this data clarifies anything.
javajosh 5y ago
Great - now The Economist needs to add a skimpflation factor, probably by doing something like buying a real Big Mac and then weighing the patty, and the wait time. (Although really everything about the experience can be skimped on, like taking away ketchup.)

Galaxeblaffer 5y ago

The Big Mac index is pretty stupid though, since the ingredients in various countries are different and not sourced from the same place. Here en Europe McD tries to be somewhat middle class while I'm the us it's absolute trash.

herbst 5y ago
Was going to say that. They have a green logo and regularly claim some of their products are hyper local now here in CH. I doubt they have to do this in many other countries. Other than that price differences in food between $ and CHF are likely mostly explained because work hours simply cost a lot more around here.
- ehnto 5y ago
  > I doubt they have to do this in many other countries. Not sure why you would think that. McDonalds is famous for catering it's menu and service to it's locale. In Australia they were required to serve real chicken in their nuggets, and they're always advertising that they use locally sourced beef for their burgers. They also rebranded in a sense to upmarket themselves, and started selling salads, cakes and coffees in order to sneak a foot into the Australian cafe scene.
  - christophilus 5y ago
    > McDonalds is famous for catering it's menu and service to it's locale. Hence, it’s a non standard product, and a pretty dumb basis for an index.
    - goodcanadian 5y ago
      It was never intended to be taken seriously. The reason that it is taken somewhat seriously is because it turns out to be a much more reliable indicator than you might naively expect. That said, no one truly relies on it for anything more than a rough indication.
    - taylorius 5y ago
      Dumb compared to what? A basket of goods curated by a government who have a vested interest in getting certain numbers out of the formula?
  - bartedinburgh 5y ago
    What do you mean by real chicken? What are McNuggets made of in the US? I saw Americans amazed at Europe’s “real cheese”, and Coca-Cola with “real sugar”. I have never heard the explanation for “real chicken” yet. This is funny and scary at the same time.
    - ehnto 5y ago
      I believe the ingredients were always different due to Australia's "Allowed Substances" list and local ingredients availability. Similar to the controversy over "Pink Slime" for their beef patties never being an issue here, because the substance was already banned. USA (according to https://www.mcdonalds.com/us/en-us/product/chicken-mcnuggets-4-piece.html https://www.mcdonalds.com/us/en-us/product/chicken-mcnuggets... ) : Ingredients: White Boneless Chicken, Water, Vegetable Oil (canola Oil, Corn Oil, Soybean Oil, Hydrogenated Soybean Oil), Enriched Flour (bleached Wheat Flour, Niacin, Reduced Iron, Thiamine Mononitrate, Riboflavin, Folic Acid), Bleached Wheat Flour, Yellow Corn Flour, Vegetable Starch (modified Corn, Wheat, Rice, Pea, Corn), Salt, Leavening (baking Soda, Sodium Aluminum Phosphate, Sodium Acid Pyrophosphate, Calcium Lactate, Monocalcium Phosphate), Spices, Yeast Extract, Lemon Juice Solids, Dextrose, Natural Flavors. Australia (according to the PDFs here https://mcdonalds.com.au/maccas-food/nutrition https://mcdonalds.com.au/maccas-food/nutrition ): Ingredients: Chicken, Water, Flour (Wheat, Corn), Canola Oil, Starch (1420, 1422, Corn, Wheat, Tapioca), Mineral Salts (450, 500, 451, 341, 327), Salt, Spices (Celery, White Pepper, Black Pepper), Sunflower Oil, Dextrose.
- lugged 5y ago
  Lol, McDonald's is "locally sourced" everywhere. It's been in their branding strategy for the last ten or so years.
  - herbst 5y ago
    I honestly had no idea, I just noticed the logo being not green in the surrounding countries. I haven't put a foot in any of their stores for over 15 years now

janandonly 5y ago

Big Mac's have gotten smaller though. So even there is an example of shrink-flation...

rightbyte 5y ago
Really? I thought it was becouse I was a kid and smaller myself.

xxs 5y ago

Big Mac depends on the popularity of MacDonalds which is incomparably higher the US than most of the EU (or Switzerland). MacDonalds is just not popular and as sibling Galaxeblaffer mentioned it's not directly targeted as a lower class restaurant. In most places/countries I have seen Big Mac are not even advertised. Some of the local regulations would prevent the same Big Mac prepared, either.

roenxi 5y ago

Although if we assume any technological progress in the last 35 years a big mac should probably have gotten a little bit cheaper. So the impact of inflation-causing-forces (aka, the reserve banks) is probably higher than 4%.

mr_toad 5y ago
Technological progress in hamburger making? It’s meat between bread. There’s only so much progress you can make. What keeps the CPI down is technological progress in other goods, like cars and TVs.
- roenxi 5y ago
  It isn't my area, but something called "Total Factor Productivity" is up around +50% since 1985 [0]. There are a lot of ways to make things cheaper. The world has seen startling progress in logistics, organisation, science and tech in the last 30 years. Some of that is applicable to gathering food more cheaply. I suppose maybe all the gains could have been eaten up (heh heh) by population growth. The underlying equilibrium here isn't static, at any rate. The real price of a hamburger will not be steady. [0] https://www.ers.usda.gov/data-products/agricultural-productivity-in-the-us https://www.ers.usda.gov/data-products/agricultural-producti...
  - extra88 5y ago
    Part of the logistics improvements over the decades is "just-in-time" delivery at multiple stages, from raw materials to store delivery. The pandemic knocked that out of whack resulting in supply chain issues. The cost of mitigating that in the short term and longer term undoing some of the over-optimization for efficiency at the expense of robustness will be passed on to the consumer.
- alanbernstein 5y ago
  McDonald's was one of the prototypes of the fast food industry. There was absolutely technological progress in food preparation to be made when they did that. It seems silly to assume they wouldn't keep that up.

emn13 5y ago

They also regularly reiterate that the index is meant partially in jest, and that you shouldn't expect it to generalize in any kind of highly accurate way. Also, the leap from forex to inflation is a big one; AFAIK they haven't argued the data is valid to use as you are here, which is different from judging exchange rates (it must surely be normal for various kinds of goods and services to inflate differently, right?). They simply point out that it works surprisingly well for something so simple. Even assuming the 2% numbers are more representative of the average household, the 4% big mac number sounds entirely consistent with that. TL;DR: this is interesting, but I don't see how this data clarifies anything.

javajosh 5y ago

Great - now The Economist needs to add a skimpflation factor, probably by doing something like buying a real Big Mac and then weighing the patty, and the wait time. (Although really everything about the experience can be skimped on, like taking away ketchup.)