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Code and data for The Economist's Big Mac index

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Re: Code and data for The Economist's Big Mac index

#21

Post by pjc50 »

dontdoitpls wrote: post #8

Consumer pricing is the last to get hit with inflation. Why do people use CPI instead of labor, housing, or stock prices to gauge inflation? On a similar note, why would anyone trust the federal reserve's numbers given how the federal reserve has lied in the past?

Much of what people label as inflation is either what is better known as "Baumol cost disease", or instead the market-distorting effects of near-invisible tax-evading overseas billionaires searching for safe assets and trampling your property market in the process.

Re: Code and data for The Economist's Big Mac index

#25

Post by ghaff »

hn_throwaway_99 wrote: post #13
p1necone wrote: post #7

I suspect the Big Mac index is not super informative in a lot of wealthier areas where the cost of shelter is growing much faster than the cost of food.

I think I'm general inflation indexes are now completely impossible to generalize because (a) inflation has been enormous in some locales and some sectors but (b) the relative price of goods is now so dependent on location. That is, like you say, in a major city I'd expect a Big Mac to be only slightly more expensive, but I'd expect housing to be astronomical. But outside of probably like 10-15 major metros I'd expec…

To be at all useful, an inflation index almost has to ignore, say, the rental cost of a 1 BR apartment in the downtown or other sought after area of a relative handful of major cities. After all, in many cases, the same dynamics often don't apply even a 60-90 minute drive away.

On the other hand, the fact that Big Macs and gallons of milk (or houses in Flint Michigan) haven't gone up much in price is more or less irrelevant to the young couple renting in Manhattan and looking for child care.

Re: Code and data for The Economist's Big Mac index

#26

Post by tomasfarias »

I see Argentina's exchange rate is about 60 Pesos per 1 Dollar. While that's not false, the government recently imposed a 30% tax to all foreign currency purchases. So while the exchange rate is 60 the final price you actually pay is 80.

This is assuming you can even buy foreign currency in the first place; people are limited to 200 USD per month.

Re: Code and data for The Economist's Big Mac index

#27

Post by emptybits »

jcranmer wrote: post #14
panarky wrote: post #2

This is the way data journalism should be done, kudos! > exchange rates are from Thomson Reuters Sorry to say I'm cynical enough to be surprised that they're allowed to republish this data.

In finance, the data is all public, and the algorithms are all secret. In oil, the data is all secret, and the algorithms are all public.

I smiled at this. But, as I'm sure you know, historic data is public in finance. There is good business in keeping current data private to sell it.

Re: Code and data for The Economist's Big Mac index

#28

Post by opo »

bhl wrote: post #15
dontdoitpls wrote: post #8

Consumer pricing is the last to get hit with inflation. Why do people use CPI instead of labor, housing, or stock prices to gauge inflation? On a similar note, why would anyone trust the federal reserve's numbers given how the federal reserve has lied in the past?

CPI is computed by the Bureau of Labor Statistics, not the Federal Reserve. As for why labor, housing, and stock prices aren’t included in the CPI, I would guess because: labor is sticky and are only indirectly related to consumption via pricing, housing is a durable good (people don’t buy it week to week nor does rent change with such frequency), and stock prices don’t affect consumption. You could make the argument…

>...housing is a durable good (people don’t buy it week to week nor does rent change with such frequency),

Rent (and "owner occupied rents") are a part of the bundle used in calculating the CPI.

The owner occupied rent is a calculation of what the rent would be if the owner had paid rent on the house they own. For some background on this:

https://www.philadelphiafed.org/-/media/research-and-data/pu...

Re: Code and data for The Economist's Big Mac index

#29

Post by rchaud »

tomasfarias wrote: post #26

I see Argentina's exchange rate is about 60 Pesos per 1 Dollar. While that's not false, the government recently imposed a 30% tax to all foreign currency purchases. So while the exchange rate is 60 the final price you actually pay is 80. This is assuming you can even buy foreign currency in the first place; people are limited to 200 USD per month.

Things like this is why I'm wary of looking too deeply into "data infographics", especially if they're related to economic statistics. The numbers alone rarely tell the whole story. They're still good for getting the "MBA-level" 30k ft view.

Re: Code and data for The Economist's Big Mac index

#30

Post by p1necone »

ghaff wrote: post #25
hn_throwaway_99 wrote: post #13

Earlier quoted context omitted.

I think I'm general inflation indexes are now completely impossible to generalize because (a) inflation has been enormous in some locales and some sectors but (b) the relative price of goods is now so dependent on location. That is, like you say, in a major city I'd expect a Big Mac to be only slightly more expensive, but I'd expect housing to be astronomical. But outside of probably like 10-15 major metros I'd expec…

To be at all useful, an inflation index almost has to ignore, say, the rental cost of a 1 BR apartment in the downtown or other sought after area of a relative handful of major cities. After all, in many cases, the same dynamics often don't apply even a 60-90 minute drive away. On the other hand, the fact that Big Macs and gallons of milk (or houses in Flint Michigan) haven't gone up much in price is more or less irr…

Those few major cities make up a sizeable portion of the population though, you can't just remove them from the data and call it a day. Perhaps the solution is splitting it into a "high density inflation index" and "low density inflation index".
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