The Big Mac Index

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Math Stuff

The Big Mac Index—Economics with a Side of Fries

Big Mac index, November 2022

Move over, stock market analysts, and make way for the burger economists. Yes, the Big Mac Index is a real thing. Since 1986, this quirky little economic tool has been helping us compare global currencies—all thanks to the humble, greasy, two-patty sandwich you’ve probably eaten in your car at least once.

Why? Because while the Big Mac might not solve world hunger, it does give us a surprisingly digestible way (pun intended) to understand purchasing power parity (PPP).

How It Works

Here’s the deal: the Big Mac is sold in over 100 countries and uses pretty much the same ingredients everywhere—beef, lettuce, bun, and whatever alchemy makes that “special sauce.” So, if a Big Mac costs $5 in the U.S. but only $3 in another country (converted to U.S. dollars), that currency might be undervalued compared to the dollar.

Think of it as economics 101, but with fries on the side. No charts, no spreadsheets—just burgers. And honestly, isn’t that how all learning should be?

Big Maconomics in Action

The Big Mac Index isn’t just a party trick. It’s been used to highlight currency discrepancies in ways that are both fun and occasionally biting (looking at you, Swiss franc).

For example, a Big Mac in Switzerland? Prepare to hand over the GDP of a small island nation. Meanwhile, in South Africa, you could practically buy two Big Macs for the price of one in the U.S. It’s like a global cheat sheet for where your vacation dollars will stretch the farthest.

Of course, it’s not perfect—local taxes, wages, and cultural factors all muddy the waters. But hey, if you’re using a burger to explain currency markets, you’ve already decided “perfect” isn’t the goal.

The Offshoots

Success breeds imitators, and the Big Mac Index is no exception. Enter the Tall Latte Index, where Starbucks prices try to make economics chic, and the Netflix Index, which compares streaming costs across the globe.

Are they useful? Maybe. Fun? Sure. But let’s face it—none of them have the universal appeal of a burger. Burgers are democratic. Streaming subscriptions and overpriced coffee? That’s the currency of people who have a favorite oat milk.

The Creator Who Never Cashed In

The Big Mac itself was created in 1967 by Jim Delligatti, a McDonald’s franchisee in Pennsylvania. He invented it to compete with larger sandwiches at other joints. It became a global icon, but poor Jim didn’t see a dime in royalties.

So, while economists were turning his burger into an international finance meme, Jim was probably sitting somewhere in Pittsburgh muttering, “You’re welcome.”

Why It Matters

Let’s not overthink this: the Big Mac Index matters because it makes complicated stuff easy. It’s a reminder that even the driest topics—global trade, currency values, PPP—can be explained with a side of fries.

And sure, there are people who’ll dismiss it as “too simplistic.” But those people also probably have strong opinions about fonts and think spreadsheets are “fun.” For the rest of us, the Big Mac Index is a brilliant shorthand for understanding the global economy without falling asleep halfway through the explanation.

Final Bite

So, next time you unwrap a Big Mac, remember: it’s more than a meal. It’s an economic lens, a cultural icon, and a sneaky way to decide where you’re traveling next. (Hint: not Switzerland, unless you think $9 for a Big Mac is fair.)

And hey, if nothing else, the Big Mac Index proves one universal truth: no matter where you are in the world, everyone loves a good burger.

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