The Big Mac index: Our interactive currency comparison tool • Hacker News Board

Re: The Big Mac index: Our interactive currency comparison tool

#31

Post by Moru » Fri, Feb 04, 2022, 2:07 PM UTC

bko wrote: post #23

eru wrote: post #17

Earlier quoted context omitted.

> Surely there were advances in production and logistics that would have lowered the "real" cost of McDonalds delivering a Big Mac, so all else being equal we would expect the price to drop over time. For that, you should look at number of minutes (or hours) the average person needs to work to afford a local Big Mac. Wikipedia's entry on the Big Mac index says that https://web.archive.org/web/20080216015122/http://ww…

I meant more on the production side. Like how much labor and raw material is required to make a Big Mac. But I guess if you consider the price relative to typical wages then it should give you a similar effect, although it would ignore the advancements in capital productivity which may not be reflected in wage data.

If there are improvements on the cost of material the profit margin for the restaurant gets bigger. The price to customer stays the same.

Re: The Big Mac index: Our interactive currency comparison tool

#32

Post by bil7 » Fri, Feb 04, 2022, 2:08 PM UTC

6LLvveMx2koXfwn wrote: post #6

jb1991 wrote: post #4

Earlier quoted context omitted.

I did this once as well. I felt a bit guilty because my friend paid the amount of Apple's largest Mac, and I never told him the mistake.

If they were rich enough not to query the error then everybody won.

classic hacker news moment: intelligent, wholesome reply to a joke.

Re: The Big Mac index: Our interactive currency comparison tool

#33

Post by genericacct » Fri, Feb 04, 2022, 2:11 PM UTC

I was thinking about the index a few days ago, I'd like to see what it looks like using the price of aspirin instead of a burger.

Re: The Big Mac index: Our interactive currency comparison tool

#34

Post by TremendousJudge » Fri, Feb 04, 2022, 2:14 PM UTC

genericacct wrote: post #33

I was thinking about the index a few days ago, I'd like to see what it looks like using the price of aspirin instead of a burger.

The thing about the big mac is that it's that the ingredients are locally sourced -- local beef, bread, vegetables, and workforce. Not so much with Aspirin, or many other "universal" products

Re: The Big Mac index: Our interactive currency comparison tool

#35

Post by zeckalpha » Fri, Feb 04, 2022, 2:14 PM UTC

yobbo wrote: post #28

The big mac index is flawed in so many ways. Labour and tax components of the costs are wildly different in countries. Raw materials might be almost irrelevant in some places. Because of this, the quality of the dining experiences are wildly different, because each restaurant owner needs to justify their costs. Add to this the effect of competition, which itself depends on local markets.

That’s the point. The PPP index is also flawed in many ways. This shows the limitations of any such index more clearly.

Re: The Big Mac index: Our interactive currency comparison tool

#36

Post by jeromegv » Fri, Feb 04, 2022, 2:18 PM UTC

bko wrote: post #7

I for one am shocked a Big Mac costs $5.81 in the United States. It's been too long I guess but I remember the meals going for $5-6 when I was a kid. And that's national average too, not an expensive metro area. Surely there were advances in production and logistics that would have lowered the "real" cost of McDonalds delivering a Big Mac, so all else being equal we would expect the price to drop over time. But monet…

Well first the price is built to entice you to get a value meal.

Second, there's a non-insignificant time for labor on making the Big Mac + we all know that the cost of beef is increasing quite a bit overtime. And while McDonalds are expert at logistics, you could argue that they have been expert for so long now that they already got all the savings they could have gone many years ago.

At the end of the day, it's expensive beef, with a labor shortage.

I'd find it surprising it didn't increase more.

Re: The Big Mac index: Our interactive currency comparison tool

#37

Post by mohanmcgeek » Fri, Feb 04, 2022, 2:18 PM UTC

The original idea used to be that you could use the price of big Mac instead of comparing every aspect of consumer spend to calculate PPP.

But clearly that isn't working anymore. Indian PPP rate which tech companies use to adjust pay is around 17-20 INR/USD. But this chart implies that the number is close to 35 INR/USD

The numbers from numbeo which uses all the aspects of consumer spend gets a ratio closer to the one used by tech companies

Maybe the original criticism of big Mac index still stands: there are cheaper burgers in other countries and they should be comparing against that.

Re: The Big Mac index: Our interactive currency comparison tool

#38

Post by greedo » Fri, Feb 04, 2022, 2:20 PM UTC

moffkalast wrote: post #20

petercooper wrote: post #14

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%…

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 extr…

Big Macs in Denmark are roughly the same price as in the US, but in Denmark you'd make $22/hour...

Re: The Big Mac index: Our interactive currency comparison tool

#39

Post by mohanmcgeek » Fri, Feb 04, 2022, 2:21 PM UTC

zeckalpha wrote: post #35

yobbo wrote: post #28

The big mac index is flawed in so many ways. Labour and tax components of the costs are wildly different in countries. Raw materials might be almost irrelevant in some places. Because of this, the quality of the dining experiences are wildly different, because each restaurant owner needs to justify their costs. Add to this the effect of competition, which itself depends on local markets.

That’s the point. The PPP index is also flawed in many ways. This shows the limitations of any such index more clearly.

Why is the PPP index flawed?

Re: The Big Mac index: Our interactive currency comparison tool

#40

Post by intrasight » Fri, Feb 04, 2022, 2:22 PM UTC

mohanmcgeek wrote: post #37

The original idea used to be that you could use the price of big Mac instead of comparing every aspect of consumer spend to calculate PPP. But clearly that isn't working anymore. Indian PPP rate which tech companies use to adjust pay is around 17-20 INR/USD. But this chart implies that the number is close to 35 INR/USD The numbers from numbeo which uses all the aspects of consumer spend gets a ratio closer to the one…

They didn't choose "burgers" - they choose something that's largely the same across the world. A Big Mac was what they choose. It's certainly not intended as a policy tool or a pay adjustment tool. But it is an interesting metric non the less.