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I like a birthday party. And this week we are celebrating the Big Four Zero for
the Big Mac index.
It was in 1986 that Pam Woodall, our former economics editor, had what she called a “bathtub moment” when she realised that buying burgers could provide a cheap and cheerful way of gauging an elusive economic variable known as purchasing power.
The World Bank needs three years and an army of statisticians and economists to compare the prices of thousands of products across 176 countries. We need a menu. You can buy a Big Mac almost anywhere. McDonald’s calibrates its burgers’ appearance, texture, flavour and smell. Wherever you get your Big Mac, you are getting much the same thing.
That makes burgernomics a good measure of the bang you can get for your buck. In America $100 buys about 16 Big Macs. That is roughly the burger-buying power of 100 euros, 426 Chinese yuan or 8,039 Japanese yen. Yet $100 in fact buys about €87 in the foreign-exchange markets, or 677 yuan, or over ¥16,000, showing how far from their purchasing power the world’s currencies have strayed.
As arguments rage about the dollar, yuan and yen and their role in sustaining global imbalances, our palatable guide to exchange rates is
as valuable as ever.
Over the decades the Big Mac index has unleashed a smorgas-burger of terrible puns. Detractors have a beef with our bun-loving index, but fans relish it. Whereas the Swiss franc is sizzling, the Taiwan dollar is consistently undercooked—and I don’t think it will soon ketchup (the central bank in Taipei is mighty cheesed off). Sandwiched in our Finance section between articles on insurance and bond markets, the Big Mac index reliably provides fast food for thought, and lettuce hope that it continues burgloriously on for another 40 years.
Our
Insider show this week
takes the Big Mac index’s 40th birthday as its starting point. I was joined by Zanny Minton Beddoes, our editor-in-chief, along with members of our economics and financial-markets team. We discussed the index’s strengths and weaknesses, before debating why the global imbalances it highlights pose a threat to the world economy. | 
Listen