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The Big Mac index: Our interactive currency comparison tool

economist.com

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

#111

Post by arketyp »

forinti wrote: post #86

One caveat about this index is that is does not consider the fact that Macdonald's has different types of customers in different countries. In rich countries, it targets lower income strata. In the third world, it targets middle and upper middle class. You can get much cheaper local food (and probably more nutritious food) on the streets. Therefore, Macdonald's is relatively more expensive in poorer countries.

Isn't the point of the index that it reflects precisely this? Because the chain of production of the burger is globally standardized, its intrinsic value should be expected to be the same everywhere.

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

#112

Post by arcticbull »

fouc wrote: post #105
amai wrote: post #95

Earlier quoted context omitted.

US Income vs US Cost of Living tells a different story. The income rose 55% more than the cost of living: https://inflationchart.com/income-in-life

This chart seems to be misleading, especially when we know that purchasing power was higher back then. It was far easier to buy a house with the income back then too.

House prices are a zoning issue primarily. [1]

In major metros, city councils prevented construction - as such supply could not meet demand and the price of housing in cities went up dramatically more than inflation.

Outside major metros, minimum setback rules, minimum size rules, and myriad other policies conspired to make the average new house twice as large as they were before, while families on average shrunk.

That said, adjusted for inflation, 1 square foot of new house costs exactly the same today as it did in the 1970s.

This is what it looks like when you have federalized zoning and allow supply to meet demand. [2, 3] This is what it looks like when you do not. [4]

I also reject the idea that it was easier to buy houses back in the day on average on a per square foot basis. In the 70s, we saw mortgage interest rates as high as 12% on a 30 year fixed. You can buy a significantly more expensive house on the same monthly payment when you're on a 30-year fixed 2% APR mortgage vs a 12% APR mortgage.

It doesn't matter that purchasing power was higher back then per unit because today you get significantly more units.

[1] https://fee.org/articles/new-homes-today-have-twice-the-squa...

[2] https://fred.stlouisfed.org/series/JPNCPIHOUQINMEI

[3] https://marketurbanism.com/2019/03/19/why-is-japanese-zoning...

[4] https://fred.stlouisfed.org/series/CPIHOSNS

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

#115

Post by mohanmcgeek »

intrasight wrote: post #40
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.

All I'm saying is, it used to reflect the PPP ratio in my country a few years ago and it definitely did when they first formulated this.

But it no longer does.

Also, unrelated: India doesn't have a Big Mac because beef is illegal in most of the country and in the other parts, most of population still doesn't eat beef.

Probably 190 is the price of some hypothetical big Mac.

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

#116

Post by csa »

samatman wrote: post #71
chucksta wrote: post #57

Earlier quoted context omitted.

I actually eat McD's specifically at least once while traveling internationally to see how much it changes. Anecdotal but its been my experience the core items taste and appear strikingly similar everywhere, and that's ~10 data points across the world.

Did you happen to sample Japan? I ask because I didn't get around to it; there's just too much good food in Japan and I wasn't there long enough. But I did have a Wendy's burger, and I can tell you: it's not the same burger you get in the States. It's much better. For a given ingredient, it will be inadequate in the US, in Japan, they are all food, like you might get from a bistro. That made me curious about McDs, bu…

I lived in Japan for several years.

The Big Mac in Japan is very tasty and definitely edible. In the US, almost every one I have had is disgusting and sloppily made. Iirc, I had one good one at one AM or so. I’ve given up on trying them.

Egg McMuffins in Japan were also better. Not sure why. I can eat them in the US, and sometimes they are good, but at least half the time I regret ordering it.

Note that these are all retrospective comparisons. I’m guessing the main differences were bread quality, freshness (not under the lamp for long), and meticulous sandwich construction.

McDs was a valid option for a quick bite in Japan (maybe once a month?). I expected something similar when I returned to the US. I was sadly disappointed.

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

#117

Post by staticman2 »

amai wrote: post #95
JohnJamesRambo wrote: post #27

Thought it was going to be this one, which I enjoy using a lot and find useful for getting the big picture. https://inflationchart.com/cpi-in-bigmac https://inflationchart.com/spx-in-bigmac In the 70s you could work minimum wage for an hour and afford three Big Macs. Now you have to work almost an hour to afford one Big Mac.: https://inflationchart.com/minwage-in-bigmac

US Income vs US Cost of Living tells a different story. The income rose 55% more than the cost of living: https://inflationchart.com/income-in-life

There doesn't seem to be an authoritative citation for the source of "cost of living" on that site, suggesting the web site is not fact based.

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

#118

Post by acdha »

bryanrasmussen wrote: post #51
greedo wrote: post #38

Earlier quoted context omitted.

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

and pay higher taxes.

… 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).

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

#119

Post by labcomputer »

Jarlakxen wrote: post #42

In Argentina one of the biggest issues with this Index is that if they use the official exchange I may look like that the Peso is way stronger than what actually it is. We have a lot of restrictions that prohibit Argentinian's from getting Dollars a that exchange ( only 200 USD a months ). It should be more fair to use the "Dollar Libre" (kind of dollars of the black market) as the exchange rate, which is double the…

Actually, the biggest issue with the Big Mac Index in Argentina, is that the government tried to regulate the price of Big Macs specifically to manipulate the index!

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

#120

Post by debo_ »

tasha0663 wrote: post #107

So many comments here miss the tone with which The Economist presents this. It encapsulates some intriguing truth about the HN commentariat that the disclaimers are so willfully ignored. > The Big Mac index was invented by The Economist in 1986 as a lighthearted guide ... > Burgernomics was never intended as a precise gauge of currency misalignment , merely a tool to make exchange-rate theory more digestible. And bef…

I really like puns. This seems to be the only place I post where I need to add /s or some other indicator to avoid literal interpretations of what I wrote.
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