Sushi vs Big Mac

 Stanley - Thursday

For a long time now, as part of my evaluation of whether to spend money, I have calculated how many sushi meals I could have if I didn't. So, for example, if a business class ticket from Cape Town to Minneapolis is $8000 round trip and an economy ticket is $2000, I figure I can have about 60 sushi meals with a fine wine if I choose economy. Sixty sushi pig-outs versus 24 hours in a slightly better seat, eating slightly better food, drinking slightly better wine. It is usually a no brainer. That's why I enjoy so much sushi.

This week's sushi

This is, of course, a variant of the Big Mac Index, introduced by Pam Woodall of The Economist in 1886. The idea was to  measure the Purchasing Power Parity (PPP) of different countries and hence have a sense whether the exchange rates between currencies made sense. The Economist said the PPP "seeks to make exchange-rate theory a bit more digestible." 

The Big Mac PPP exchange rate is determined by dividing the price of a Big Mac in one country (in its currency) by the price of a Big Mac in another country (in its currency). This value is then compared with the actual exchange rate. If it's lower, then the first currency is under-valued.

For example, using figures in July 2008:

1. The average price of a Big Mac was $3.57 in the United States.
2. The average price of a Big Mac was £2.29 in the United Kingdom.
3. The PPP was $1.56 to £1, that is $3.57/£2.29 = 1.56.
4. The actual exchange rate at the time was $2.00 to £1.
5. (2.00–1.56)/1.56 = 28%. So the pound was thus overvalued against the dollar by 28%.  Today it is $1.33 to £1.

The table below is taken from Wikipedia.

Six most expensive (18 July 2018) 

1.   Switzerland – $6.57 (6.50 CHF)
2.  Sweden – $5.83 (51.00 SEK)
3.  United States – $5.51
4.  Norway – $5.22 (42 NOK)
5.  Canada – $5.08 (6.65 CAD)
6.  Euro area – $4.75 (4.56 EUR)

Six cheapest (18 July 2018) 

1.  Egypt – $1.75 (31.37 EGP)
2.  Ukraine – $1.91 (50 UAH)
3.  Russia – $2.09 (130 RUB)
4.  Malaysia – $2.10 (8.45 MYR)
5.  Indonesia – $2.19 (31,500 IDR)
6.  Taiwan – $2.27 (69 TWD)

Egypt here I come.

But, wait a minute, I don't eat Big Macs.

Since the introduction of the Big Mac Index, there have been a number of variants: the tall latte index comparing the costs at Starbucks around the world; similarly the Starbucks chai latte index; the iPod index; and the IKEA Billy bookshelf index to name a few. Due to the low number of McDonalds in Africa, the Big Mac Index is usually replaced with the KFC index.

Another variant is to calculate how long it takes a worker in the country to earn enough money to buy a Big Mac. The table below is taken from Wikipedia.

The table below is taken from Wikipedia.

Six fastest earned (July 2015) 

1.  Hong Kong – 8.6 min
2.  Luxembourg – 10.3 min
3.  Japan, Tokyo – 10.4 min
4.   Switzerland, Zürich – 10.6 min
5.  United States, Miami – 10.7 min
6.   Switzerland, Geneva – 10.8 min

Six slowest earned (July 2015) 

1.  Kenya, Nairobi – 172.6 min
2.  Philippines, Manila – 87.5 min
3.  Mexico, Mexico City – 78.4 min
4.  Indonesia, Jakarta – 66.7 min
5.  Egypt, Cairo – 62.5 min
6.  Ukraine, Kyiv – 54.7 min

 Somebody probably received a PhD in economics for this!.

Overall, the Big Mac Index of a country doesn't mean a thing to me. I always prefer sushi!