
The Big Mac Index - CaptainZapp
http://www.economist.com/content/big-mac-index
======
vonklaus
This 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
Interesting. 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
Its 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
Additionally, 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...](http://www.frbsf.org/economic-
research/publications/economic-letter/1997/may/bias-in-the-cpi-roughly-right-
or-precisely-wrong/)

> _a lot of work (and tables) go into that number._

Economics is a whole _field_ of study.

~~~
dragonwriter
> The CPI is flawed, of course, like any attempt to turn 300 million peoples'
> worth of purchases into a single number.

The CPI doesn't even in theory try to do that, which is why it includes CPI-U,
CPI-W, and C-CPI-U, each of which is tracked raw and seasonally adjusted, and
each of which contains numerous measures (not a single number), the most
frequently used of which seem to be the "all items", "all items less food and
energy", "food", "energy", and "gasoline" components. (And all of which relate
to US _urban consumers_ \-- for CPI-U and C-CPI-U -- or a subset thereof --
for CPI-W -- which are less than 300 million people.)

------
narsil
The 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.

------
dhimes
Totally OT, but Ghostery had a hernia on this page.

    
    
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~~~
sehr
Web of cruft.

------
alister
What 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_...](http://brazilsense.com/index.php?title=Items_more_expensive_and_less_expensive_in_Brazil).

~~~
forinti
McDonald'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
Brazilian here and I can attest to this.

In the U.S, I only go to McDonald's if I'm alone and don't have an option(
Chipotle is closed).

In Brazil, you'll see some families choosing it over local cuisine for
'modernity' or even 'sophistication'.

~~~
thanatropism
What? Where?

You're either talking about lower-lower middle class, or far outside the large
metros, I presume?

I'm amazed no one mentioned Bob's Burgers, at any rate. Are you in the same
Brazil I'm in?

~~~
ucaetano
Lower-income middles class can't afford R$15 burgers with the average (not
median, which is much lower) household income per capita being ~R$1000/month.
In practice, less than 20% of families make that much. With combos, 10 meals
would account for 20% of pre-tax income.

Data is a couple years old, but still relevant:
[https://sacrariopessoal.files.wordpress.com/2014/10/faixascm...](https://sacrariopessoal.files.wordpress.com/2014/10/faixascm20121.jpg)

------
martokus
I'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/)

------
ihuman
They 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/)

------
arafa
I 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.

------
russ5russ
I 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
Is 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?

~~~
Xophmeister
Beer?

~~~
robmcm
It 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
Or just count the cheapest alcohol available

~~~
robmcm
Again 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
A 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.

------
ommunist
Well, I do not think brokers are eager to buy Venezuelan IT start-up shares
just because Big Mac is most severely undervalued there.

~~~
ciroduran
Specially 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
Yeah, 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-s...](http://blogs.wsj.com/frontiers/2015/02/04/venezuela-seizes-
supermarket-chain-stores/)

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...

------
Shivetya
is 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
I'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
Europe 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.

