Wednesday, 13 February 2019

The Big Mac Index

"Burgernomics" logo (The Economist, 2018)
Way, way back in 1986, The Economist decided to create a rather tongue-in-cheek index comparing the price of a McDonald’s Big Mac in a range of – now – 56 countries. Called ‘burgernomics’, it shows the cost of buying a Big Mac in USD, compared to the USA as the base. 

Data from last July shows that the most expensive places to buy a Big Mac are – in order – Switzerland, Norway, Sweden, The US and Canada. Australia is in 10th place. New Zealand is 14th most expensive, followed by the UK in 15th place. China is in 35th place. The five cheapest places to buy are a Big Mac are Malaysia, Argentina, Turkey, the Ukraine, and – the cheapest of all – Russia at number 56.

While originally to show whether currencies are under- or over-valued, it is interesting that over more than 30 years the Big Mac index has come to have its own intrinsic value, made possible largely because of the consistency of the burger itself. It is made in the same way everywhere, using the same ingredients, with the same process, and theoretically with the same amount of labour. The inputs for production should be largely the same. 

Even if McDonalds appears to you as it does to me (inedible), the index provides another parity-purchasing measure to illustrate the actual cost of living in the country where it is sold. Taken with the prices of fuel, the level of debt, unemployment and wages, this can give us a reasonably accurate idea of which nations are doing well, and which are not.

By most global statistics, the US is not doing well: the cost of living has increased, employment is down, and household income has decreased. It will be interesting to see what the Big Mac index shows this coming July.


Sam

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