BURGERNOMICS

Economisthas link after link devoted to a discussion of the Big Mac Index:

Burgernomics is based on the theory of purchasing-power parity, the notion that a dollar should buy the same amount in all countries. Thus in the long run, the exchange rate between two countries should move towards the rate that equalises the prices of an identical basket of goods and services in each country. Our “basket” is a McDonald’s Big Mac, which is produced in about 120 countries. The Big Mac PPP is the exchange rate that would mean hamburgers cost the same in America as abroad. Comparing actual exchange rates with PPPs indicates whether a currency is under- or overvalued.

This is a rather amusing variation on PPP, although one would presume that the price of a burger would vary somewhat based on the proximity to cheap beef. One also wonders about gauging the economy of India.

(Hat tip: Steven Taylor)

FILED UNDER: Economics and Business
James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Paul says:

    On a related note, a very impressive correlation can be drawn between the minimum wage and the cost of a “Big Mac, Fries and a Coke.”

    I have been spouting my “Big Mac” theory for years.

    It really shows that raising the minimum wage to help the burger flippers only causes burger prices to go up so the burger flippers really never get anywhere.

    (except to the voting booths to vote for Dems which is what the minimum wage is really for.)