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The Big Mac Index
- russ5russ 11y agoI love me some Big Mac indices. The concept is intriguing. I'd like to see the potato index or something non brand related. The trouble is choosing the right veggie/product
- stephengillie 11y agoIs there another food item that is so ubiquitous? Some cultures don't eat rice. Some cultures don't eat potatoes. Some cultures don't eat corn. Some don't eat tofu. And for the many food items that are somewhat easy to find worldwide, demand will be different. And is there another measuring stick that would give us the simultaneous jab against globalization and corporate imperialism?
- rottyguy 11y agoWhen I traveled a bit last year, it seemed KFC was everywhere! I would think a Chicken Index would be as good as any to have.
- latch 11y agoKFC is definitely more popular than McDonalds in Asia. Chicken and pork are much more popular than beef. I've always assumed it had to do with the stupendously inefficient nature of beef in terms of cost & land.
- tosseraccount 11y agoBeef is also taboo in India.
- Mikeb85 11y agoMcPaneer sandwich index?
- seanmcdirmid 11y agoI went to KFC the other day, since the McDonald's next door was way too busy. KFC doesn't always do better than McDs, at least in Beijing.
- manolus 11y agoIt's not common in Brazil.
- SilasX 11y agoNot really food, but ubiquitous and immune to local shocks: insulin.
- manyxcxi 11y agoNot true. My dad's side of the family lives in Libya and one of my aunts requires insulin- the price went up at least 5x during the worst of it and it's still currently 3x of what it used to be.
- SilasX 11y agoI mean differential shocks -- you want the index/item to track the general price differences between the countries, and not be thrown off by a cow disease that drives up milk -- or a good just being cheaper because of favorable local conditions. If insulin became expensive during the war, that was only because things became more expensive in general, right? That's what the index should capture: "you need 3x in dollar terms to buy the same stuff in Libya."
- thingylab 11y agoHow good is your index if you don't capture local shocks?
- Xophmeister 11y agoBeer?
- robmcm 11y agoIt needs to be consistent quality and non imported ideally. Guiness for example is going to cost a lot to ship, or local beer could be very low quality in order to keep the price affordable.
- Iiop1 11y agoOr just count the cheapest alcohol available
- robmcm 11y agoAgain it will likley be imported from countries with lower labor costs. You need something perishable, and of low enough cost that importing is unlikley. Bread would be a good option but has the issue that it's not as common in Japan as France, it also varies wildley where as a big mac is generally consistent.
- taejo 11y agoA Big Mac, as a branded item, varies by cultural context: in the US, it's super cheap fast food; in Europe it might be late-night after-party food; in Asia, an extravagant treat.
- deleted 11y ago[deleted]
- jon-wood 11y agoYes please, it always helps an economics discussion.
- refurb 11y agoThe biggest issue with alcoholic beverages are the taxes that go along with them. Some countries have very high alcohol taxes while others have almost none. That would seriously throw off the PPP calculation.
- thingylab 11y agoAny practical reason you'd want a "non brand related" index? The way I understand it the Big Mac index is pretty good because it casts a wide net from the cost of producing (or importing) food to the price of labour, and everything in between. I doubt you'd get that with a potato.
- Drakim 11y agoWhile it's true that the price of labor, production, transportation, etc, would affect the cost of the Big Mac, it's still ultimately up to McDonalds to set the price, deciding what sort of margin they want from the product, maybe taking into account stuff like brand recognition. So, using something like the potato would eliminate that sort of "bias" to the product, as no one party controls the potato, and thus couldn't artificially set the price higher at a whim. If the price of the potato rose, it would be because the whole market reacted to some changes to transportation or production costs, not because management has decided that they want to build their brand as being expensive and exclusive (which we know happens with a lot of brand products).
- jsprogrammer 11y agoThere are dozens of varieties of potato. Not all have the same costs to go from seed to market. What is a 'potato'?
- thingylab 11y ago1) I think you're asking too much of what is essentially a silly experiment. 2) What if potatoes become hip? 3) If you want auditable PPP conversion rates: http://data.worldbank.org/indicator/PA.NUS.PPP http://data.worldbank.org/indicator/PA.NUS.PPP
- wikiwawa 11y agoMore ubiquitous, Coke: http://blog.premise.com/data/science/2014/09/26/introducing-premise-coca-cola-index/ http://blog.premise.com/data/science/2014/09/26/introducing-...
- alister 11y agoWhat a difference a year makes. Brazil had the most overvalued currency in the world a year ago[1] according to the Big Mac Index, but today it's undervalued by 10.6%. It strikes me that currency exchange rate is a very inconspicuous thing with a big effect. Unlike inflation, interest rates, or how much rent you pay--which everyone is aware of--most people don't sense changes in exchange rate, the effect of which is just as profound. [1] http://brazilsense.com/index.php?title=Items_more_expensive_and_less_expensive_in_Brazil http://brazilsense.com/index.php?title=Items_more_expensive_....
- wernerpm 11y agoIt's interesting to see how most countries dropped last year because of the exchange rate. For a weird graph look at Venezuela, $9.08 in 2013 and $0.67 now.
- forgetsusername 11y ago>most people don't sense changes in exchange rate Perhaps if you're American. Here in Canada, people are made aware of the US/CDN exchange rate daily, and large moves (like recently) are news.
- Mikeb85 11y agoThe exchange rate is news, however I haven't really noticed any effect on my life (maybe when I travel, however the places I visit in the US are still cheaper than where I live).
- forinti 11y agoMcDonald's in Brazil targets a customer base very different from MacDonald's in other countries. In the US, McDonald's is cheap fast food; in Brazil its stores appeared first in posher shopping malls. The local alternative (xis) is a lot cheaper, so pricing probably has a lot to do with market segmentation, which would render such comparisons useless.
- dataker 11y ago
- ommunist 11y agoWell, I do not think brokers are eager to buy Venezuelan IT start-up shares just because Big Mac is most severely undervalued there.
- ciroduran 11y agoSpecially if you cannot freely convert VEB to any currency under any of the three (yes, three) official rates, unless you're a friend of the government.
- fennecfoxen 11y agoYeah, and the government can step in and seize your business if they feel like it: http://blogs.wsj.com/frontiers/2015/02/04/venezuela-seizes-supermarket-chain-stores/ http://blogs.wsj.com/frontiers/2015/02/04/venezuela-seizes-s... You'll probably be fine with a small-time software business but you won't see anyone hurry to commit a bunch of cash to turn something into a $1B Venezuela unicorn...
- dorgo 11y agoForget IT. Buy Burger in Venezuela and sell them in USA. 4$ profit per burger.
- deleted 11y ago[deleted]
- vonklaus 11y agoThis is essentially how inflation is calculated. Instead of just a big mac, an entire basket of predetermined everyday items and services are watched for changes and the fluctuation in prices are averaged for a domestic locale giving us the consumer price index. Then the numbers of the previous CPI are compared to the current. Also, some people have taken to using the "iPod index" or really any uniform product that is widely available and standardized.
- magicmu 11y agoInteresting. Is there an existing standard for what everyday goods are used in determining inflation? I understand the usefulness of a "quick 'n dirty" gauge like this big mac index (or the iPod index you mentioned), but I'd be surprised if there isn't some standard set of goods which are watched as general indicators of inflation.
- dragontamer 11y agoIts pretty obvious if you read a CPI report yourself. http://www.bls.gov/cpi/cpid1505.pdf http://www.bls.gov/cpi/cpid1505.pdf Page 6 has the list and the weights of all goods per category. Housing is 42% of the CPI index, for example. Urban consumers vs Rural consumers are combined together, but the later tables split them out again. People generally only talk about the single CPI number as an indicator in inflation. But a lot of work (and tables) go into that number.
- fennecfoxen 11y agoAdditionally, depending on what you're trying to measure, there are a variety of different sorts of ways to adjust for inflation. The CPI is a measure of consumer prices, and used by the Fed as a target for inflation in order to maintain price stability, but there are others: http://www.measuringworth.com/uscompare/ http://www.measuringworth.com/uscompare/ The CPI is flawed, of course, like any attempt to turn 300 million peoples' worth of purchases into a single number. The Federal Reserve itself thinks that it's a little bit on the high side, not doing enough to adjust for the changes that occur when better products are introduced or when people change their purchasing behavior (e.g. switching to generic products): http://www.frbsf.org/economic-research/publications/economic-letter/1997/may/bias-in-the-cpi-roughly-right-or-precisely-wrong/ http://www.frbsf.org/economic-research/publications/economic... > a lot of work (and tables) go into that number. Economics is a whole field of study.
- ihuman 11y agoThey appear to be using highcharts.js for the interactive graph (according to the mouseover event on the bars) http://www.highcharts.com/ http://www.highcharts.com/
- martokus 11y agoI'm actually using this data for some pricing decisions for online products that we sell. I've actually made my own version that provides a bit more explanation and it targeted towards marketers and the likes http://www.bigmacindexconverter.com/ http://www.bigmacindexconverter.com/
- arafa 11y agoI enjoy that they added the dataset for download this year, and some other changes. But the dataset's not available at the moment. And it's in .xls format when it should just be a csv.
- narsil 11y agoThe World Bank publishes PPP conversion factors: http://data.worldbank.org/indicator/PA.NUS.PPPC.RF http://data.worldbank.org/indicator/PA.NUS.PPPC.RF "It tells how many dollars are needed to buy a dollar's worth of goods in the country as compared to the United States." I prefer this to absolute numbers as the absolute number fluctuates with the exchange rate.
- Shivetya 11y agois it a good idea to group so much of the EU together? Some economies there are not as able to handle the single currency as others. Stronger states with better managed economies put more pressure on weaker economies with regards to borrowing costs and more.
- Gustomaximus 11y agoI've heard this POV several times. If such a good idea why don't USA, China or India consider breaking regions into individual currencies. You never hear this. I'm not saying this POV either right or wrong. Just Each of these other countries is 'Europe" or larger in their own right with distinct regional wealth differences. So why is this important for Europe and not other large diverse countries?
- TheCoelacanth 11y agoEurope is not a country. It does not have unified economic policy. If Europe started acting like a nation, and instituted a unified economic policy over the whole Euro-zone, then it would probably work just fine. However, there is no indication that will ever do that because all of the constituent countries like their sovereignty too much.
- dhimes 11y agoTotally OT, but Ghostery had a hernia on this page. ADARA Analytics Detected tracker source URLs: http://tag.yieldoptimizer.com/ps/ps?t=s&p=1814&pg=Page http://tag.yieldoptimizer.com/ps/ps?t=s&p=1814&pg=Page BlueKai Brightcove DoubleClick DoubleClick Floodlight Effective Measure Facebook Connect Google AdWords Conversion Google AJAX Search API Google+ Platform Grapeshot LinkedIn Widgets Maxymiser Omniture (Adobe Analytics) Polar Mobile Quantcast Sub2 Tapad Tealium TRUSTe Notice Turn Inc. Twitter Button ValueClick Media
- sehr 11y agoWeb of cruft.