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I don't see how this really works any more because a Big Mac is different in different countries. It's not an "identical" product being compared. You can use M

I don't see how this really works any more because a Big Mac is different in different countries. It's not an "identical" product being compared. You can use McDonald's own local nutrition calculators to confirm this. A Big Mac in the US is 550 calories, yet 508 calories in the UK (522 in Russia and a mere 498 in Switzerland, for comparison). Is it factored into the index that British fast food fans are getting 7.6% less burger as well as paying more than a US consumer?

moffkalast 5y ago
I think there's more to consider here too that makes it irrelevant in terms of currency comparison. Usually cheap stuff like bread is notoriously expensive in Switzerland for example, I'd assume because the price of labour is that high. As such the cost of making a big mac there is also more expensive, buying power is higher, so to meet demand and recoup labour costs the end prices are higher. Same for the other extreme example in Turkey where workers are dirt cheap, and as such don't have much buying power or contribute that much to the overall burger cost, so the price is effectively lower. This is just another standards of living map, it has barely anything to do with currency conversion. The Lira isn't undervalued, it's in a hyperinflation nosedive because of gross monetary mismanagement of Turkey lol.
- mym1990 5y ago
  It isn't about converting currency as much as a hypothetical arbitrage play in the difference between exchange rates and actual prices. If I took a bunch of dollars to Turkey, converted them, bought an obscene amount of Big Macs, brought them back to the US, and resold them, there would be a lot of money to be made due to the value gap. Obviously ignore the fact that Big Macs are perishable goods(arguable?) and that there isn't a decent market for second hand burgers...but this would work for other goods imported into the US.
  - moffkalast 5y ago
    Yeah theoretically, except customs tend to nullify that exact arbitrage profit. If anything you'd have a major loss. Could work for inside the EU I guess though, between those that don't use the Euro and those that do.
  - gruez 5y ago
    I'm not sure if you realize this, but your entire comment can essentially be summarized to "offshoring".
    - mym1990 5y ago
      This isn’t really accurate. Offshoring is the act of moving services or processes to a foreign entity, and while the processes can be the production of goods, my example is simply explaining price arbitrage between goods that are existing. The same thing can be done in forex markets, but the markets are too efficient to actually find those opportunities regularly. And I wouldn’t call forex trading “offshoring”.
- greedo 5y ago
  Big Macs in Denmark are roughly the same price as in the US, but in Denmark you'd make $22/hour...
  - moffkalast 5y ago
    The average purchasing power of both seem to be about the same though: https://www.nationmaster.com/country-info/compare/Denmark/United-States/Cost-of-living https://www.nationmaster.com/country-info/compare/Denmark/Un... The US definitely has much higher inequality, so maybe comparing average rather than median could be unrealistic.
  - bryanrasmussen 5y ago
    and pay higher taxes.
    - acdha 5y ago
      … and get considerably more for those taxes. When you do the math, the combined federal + state + local tax rate plus health insurance and related expenditures starts to look awfully close to what someone in Denmark gets, except that their services also work better (e.g. nobody has a part-time job fighting their insurance company to and/or hospital to pay the correct amount).
      - deleted 5y ago
        [deleted]
    - acdha 5y ago
      Hey, saw the comment you deleted. I'm sorry you're in a rough situation — I had a coworker in similar straits and hope that you find something which works out for your family as they eventually did.
  - long_time_gone 5y ago
    It's not quite that simple. The US Big Mac [1] has 11% more calories than the Denmark Big Mac [2], which is an 11% difference. Also, the average hourly wage in the US is $31.63 [3] as of January 31st. [1] https://www.mcdonalds.com/us/en-us/product/big-mac.html https://www.mcdonalds.com/us/en-us/product/big-mac.html [2] https://www.myfitnesspal.com/food/calories/mcdonalds-big-mac-denmark-104423524 https://www.myfitnesspal.com/food/calories/mcdonalds-big-mac... [3] https://www.bls.gov/news.release/empsit.b.htm https://www.bls.gov/news.release/empsit.b.htm
- bryanrasmussen 5y ago
  >Usually cheap stuff like bread is notoriously expensive in Switzerland for example, maybe ingredient quality in some places might be legally mandated, increasing price (I know everyone gets the same, but not if the law says different) basically the thing I'm thinking of is an article about a year ago where some sort of white bread was declared legally not bread but a form of cake by some EU country - can't remember but a similar ruling could affect bun quality in various countries.
  - gruez 5y ago
    That's not really an issue because big mac advertising rarely mentions "bread" explicitly. They could make it out of actual cake, and probably be fine as long as they called it a "bun" rather than "bread".
    - jaclaz 5y ago
      It is not about the advertising, it is about the nature of the bread to fit the one or the other tax (VAT) bracket.
  - jaclaz 5y ago
    I think you are referring to Subway sandwich bread: https://www.nbcnews.com/news/world/subway-s-sandwich-bread-isn-t-legally-bread-irish-court-n1241741 https://www.nbcnews.com/news/world/subway-s-sandwich-bread-i...
    - bryanrasmussen 5y ago
      right it's that, couldn't remember who it was, just saying that there could be regulations and if so that could add to cost in different regions.
- nautilius 5y ago
  I think you will find that countries with a bread culture (e.g. Switzerland, Germany, France, etc) will not agree that what you consider bread is what they consider bread. This is a question about quality, not labour prices. Take the inverse: in Germany, by and large, a hamburger is that thing you get at McDonalds. That Americans typically pay more than $2.00 for a hamburger is not a sign of high labour costs, but rather that they'll buy something better instead.
IncRnd 5y ago
From actually reading the article: Burgernomics was never intended as a precise gauge of currency misalignment, merely a tool to make exchange-rate theory more digestible. Yet the Big Mac index has become a global standard, included in several economic textbooks and the subject of dozens of academic studies. For those who take their fast food more seriously, we also calculate a gourmet version of the index.
- deleted 5y ago
  [deleted]
sdze 5y ago
Maybe these countries all have different calorie counting rules.
- aidenn0 5y ago
  Indeed, plus even in a single regulatory region you may have many allowable ways of counting the calories that end up with different results.

moffkalast 5y ago

I think there's more to consider here too that makes it irrelevant in terms of currency comparison. Usually cheap stuff like bread is notoriously expensive in Switzerland for example, I'd assume because the price of labour is that high. As such the cost of making a big mac there is also more expensive, buying power is higher, so to meet demand and recoup labour costs the end prices are higher. Same for the other extreme example in Turkey where workers are dirt cheap, and as such don't have much buying power or contribute that much to the overall burger cost, so the price is effectively lower. This is just another standards of living map, it has barely anything to do with currency conversion. The Lira isn't undervalued, it's in a hyperinflation nosedive because of gross monetary mismanagement of Turkey lol.

mym1990 5y ago
It isn't about converting currency as much as a hypothetical arbitrage play in the difference between exchange rates and actual prices. If I took a bunch of dollars to Turkey, converted them, bought an obscene amount of Big Macs, brought them back to the US, and resold them, there would be a lot of money to be made due to the value gap. Obviously ignore the fact that Big Macs are perishable goods(arguable?) and that there isn't a decent market for second hand burgers...but this would work for other goods imported into the US.
- moffkalast 5y ago
  Yeah theoretically, except customs tend to nullify that exact arbitrage profit. If anything you'd have a major loss. Could work for inside the EU I guess though, between those that don't use the Euro and those that do.
- gruez 5y ago
  I'm not sure if you realize this, but your entire comment can essentially be summarized to "offshoring".
  - mym1990 5y ago
    This isn’t really accurate. Offshoring is the act of moving services or processes to a foreign entity, and while the processes can be the production of goods, my example is simply explaining price arbitrage between goods that are existing. The same thing can be done in forex markets, but the markets are too efficient to actually find those opportunities regularly. And I wouldn’t call forex trading “offshoring”.
greedo 5y ago
Big Macs in Denmark are roughly the same price as in the US, but in Denmark you'd make $22/hour...
- moffkalast 5y ago
  The average purchasing power of both seem to be about the same though: https://www.nationmaster.com/country-info/compare/Denmark/United-States/Cost-of-living https://www.nationmaster.com/country-info/compare/Denmark/Un... The US definitely has much higher inequality, so maybe comparing average rather than median could be unrealistic.
- bryanrasmussen 5y ago
  and pay higher taxes.
  - acdha 5y ago
    … and get considerably more for those taxes. When you do the math, the combined federal + state + local tax rate plus health insurance and related expenditures starts to look awfully close to what someone in Denmark gets, except that their services also work better (e.g. nobody has a part-time job fighting their insurance company to and/or hospital to pay the correct amount).
    - deleted 5y ago
      [deleted]
  - acdha 5y ago
    Hey, saw the comment you deleted. I'm sorry you're in a rough situation — I had a coworker in similar straits and hope that you find something which works out for your family as they eventually did.
- long_time_gone 5y ago
  It's not quite that simple. The US Big Mac [1] has 11% more calories than the Denmark Big Mac [2], which is an 11% difference. Also, the average hourly wage in the US is $31.63 [3] as of January 31st. [1] https://www.mcdonalds.com/us/en-us/product/big-mac.html https://www.mcdonalds.com/us/en-us/product/big-mac.html [2] https://www.myfitnesspal.com/food/calories/mcdonalds-big-mac-denmark-104423524 https://www.myfitnesspal.com/food/calories/mcdonalds-big-mac... [3] https://www.bls.gov/news.release/empsit.b.htm https://www.bls.gov/news.release/empsit.b.htm
bryanrasmussen 5y ago
>Usually cheap stuff like bread is notoriously expensive in Switzerland for example, maybe ingredient quality in some places might be legally mandated, increasing price (I know everyone gets the same, but not if the law says different) basically the thing I'm thinking of is an article about a year ago where some sort of white bread was declared legally not bread but a form of cake by some EU country - can't remember but a similar ruling could affect bun quality in various countries.
- gruez 5y ago
  That's not really an issue because big mac advertising rarely mentions "bread" explicitly. They could make it out of actual cake, and probably be fine as long as they called it a "bun" rather than "bread".
  - jaclaz 5y ago
    It is not about the advertising, it is about the nature of the bread to fit the one or the other tax (VAT) bracket.
- jaclaz 5y ago
  I think you are referring to Subway sandwich bread: https://www.nbcnews.com/news/world/subway-s-sandwich-bread-isn-t-legally-bread-irish-court-n1241741 https://www.nbcnews.com/news/world/subway-s-sandwich-bread-i...
  - bryanrasmussen 5y ago
    right it's that, couldn't remember who it was, just saying that there could be regulations and if so that could add to cost in different regions.
nautilius 5y ago
I think you will find that countries with a bread culture (e.g. Switzerland, Germany, France, etc) will not agree that what you consider bread is what they consider bread. This is a question about quality, not labour prices. Take the inverse: in Germany, by and large, a hamburger is that thing you get at McDonalds. That Americans typically pay more than $2.00 for a hamburger is not a sign of high labour costs, but rather that they'll buy something better instead.

IncRnd 5y ago

From actually reading the article: Burgernomics was never intended as a precise gauge of currency misalignment, merely a tool to make exchange-rate theory more digestible. Yet the Big Mac index has become a global standard, included in several economic textbooks and the subject of dozens of academic studies. For those who take their fast food more seriously, we also calculate a gourmet version of the index.

deleted 5y ago
[deleted]

sdze 5y ago

Maybe these countries all have different calorie counting rules.

aidenn0 5y ago
Indeed, plus even in a single regulatory region you may have many allowable ways of counting the calories that end up with different results.