Exploring the world of quirky economic indices: the Big Mac index & beyond

Exploring the world of quirky economic indices: the Big Mac index & beyond
Photo by amirali mirhashemian / Unsplash

Have you ever wanted to get a better sense of how the economy is doing around the world, but found it hard to wrap your head around complex economic indicators like the Gross Domestic Product or consumer price inflation? If yes, then you’re in luck! In this blog post we’ll be exploring some of the most creative and weirdest economic indices out there — from The Economist's Big Mac Index to measuring happiness. Join us as we embark on an adventure into unconventionally looking at global prosperity!

Quick recap on inflation, the leading cost-of-living indicator

Inflation is an important economic indicator that measures the rate of increase in prices for goods and services over a period of time. It is typically measured by taking the percentage change in a basket of commonly used items such as food, clothing, housing, transportation, medical care and education. This helps to give a more accurate representation of how much people are spending on things they need or want to buy. Inflation can have both positive and negative impacts on an economy depending on what it means for consumers’ purchasing power - if inflation rises too quickly it can lead to higher costs which could reduce consumer demand and hurt businesses. As such, keeping track of inflation is critical for governments around the world so they can make informed decisions about their fiscal policies. But what if there was an alternative way to understand the evolution of prices across countries?

Introducing the Big Mac index

The Big Mac Index is a creative and unconventional way of measuring global prosperity. Developed by The Economist in 1986, the index compares the price of a single McDonald’s Big Mac hamburger across countries to measure purchasing power parity (PPP) among different currencies. The idea behind the index is that a burger should cost roughly the same amount no matter where you are in the world, after all costs have been adjusted for local currency exchange rates. By comparing prices around the world, we can get an indication of whether or not one currency is overvalued or undervalued compared to another.

Examining the pros & cons of using the Big Mac index

The Big Mac Index offers a unique insight into the global economy, as it provides an accessible and fun way for people to compare prices of goods across the world. The comparison can offer valuable information on currency values in relation to each other, which can be useful for investors and international businesses. Additionally, it is easy to implement and monitor since McDonald’s Big Mac burgers are a standardized product and their prices can be tracked on a regular basis. However, the index does have its limitations. For example, since it is based on one single product, it cannot provide an accurate representation of overall cost of living or economic conditions in a country. Additionally, the index does not take into account non-economic factors, such as transportation costs or local taxation.

Comparing the Big Mac index to other economic indicators

The Big Mac Index is quite different from other economic indicators, such as the Inflation Rate or the Consumer Price Index. These standard measures of economic activity are typically used to gauge macro-economic conditions in a given country, such as whether an economy is overheating or experiencing deflation. By comparison, the Big Mac Index is mainly used for comparative purposes, and is not a good indicator of overall economic conditions.

Other funky Economic indices you never Knew Existed

In addition to the Big Mac Index, there are a number of other quirky economic indices out there for you to explore. For example, The Economist also publishes a Happiness Index that measures subjective well-being by comparing data on life expectancy, income and education levels across countries. And if you want to go even more crazy, there is plenty of options out there. Just to name a few:

  • Beer price index: the cost of a pint.
  • Pizza price index: the cost of a pizza.
  • Misery index: a measure of economic hardship that takes into account unemployment and inflation.
  • Ease of doing business index: a measure of the business environment across countries.
  • QIWI payment index: a measure based on the cost of online payments.
  • Glass half full or half empty index: a measure of optimism in the economy.
  • Well-being index: a measure of happiness and satisfaction with life.
Misery Index, source: Statista

How these metrics inform international business strategies

These unconventional indices can provide valuable insights for international businesses looking to expand their operations. For example, the Beer Price Index could help executives gauge potential consumer demand for alcoholic beverages in a given region, while the Misery Index might inform decisions on where to locate production facilities due to lower costs of labor. Similarly, the Ease of Doing Business Index can provide an indication of the regulatory environment for foreign investors, and the Well-Being Index could be used to identify potential markets for consumer products. Ultimately, these quirky indices can help businesses make better informed decisions on where to expand their operations.

Final thoughts on quirky economic indices

In conclusion, the Big Mac index is just one of many quirky economic indices that can provide valuable insights to businesses looking to expand their operations. The unique metrics such as the Beer Price Index and Misery Index can help executives make more informed decisions on where they should invest in or relocate their production facilities. Additionally, these metrics could be used to identify potential markets for consumer products based on life satisfaction levels or ease of doing business regulations. However when it comes to measuring the general health of the economy, more standard indexes are definetely more accurate and reliable.