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| Hamburgers by uberculture/Flickr |
In the same week that I heard about some really
unappetizing food at McDonalds, The Economist came out with its latest analysis
of foreign-exchange rates according to its popular Big Mac index. This is how
The Economist explains its index:
"Its secret sauce is the theory of
purchasing-power parity (PPP), according to which prices and exchange rates
should adjust over the long run, so that identical baskets of tradable goods
cost the same across countries. Our basket contains only a Big Mac, and relies
on the efforts of McDonald’s to produce identical products from the same
ingredients everywhere - underlining
added - (or almost everywhere: for India we use the Maharaja Mac, which
contains chicken rather than beef) "
So by and large, the Big Mac Index is based on
comparing the price of an identical product (i.e. the Big Mac) around the
world, the Index can determine whether a local currency is over - or
undervalued against the dollar. The Economist continues:
"... At market exchange rates, the Canadian
version of the burger costs $5.39, compared with an average price of $4.37 in
America. By our reckoning, then, the Canadian dollar is roughly 24% overvalued
relative to its American counterpart...."
Generally, average prices of hamburgers are lower
in poor countries due to their lower labor costs, and this would invalidate
some of the Index' conclusions, claim critics of the Big Mac Index. But I pose
there is another criticism based on the "identical product"
assumption.
A few days ago, I read the following alarming
article McDonald's McRib Sandwich a Franken Creation of GMOs, ToxicIngredients, Banned Ingredients on the Natural Society website. This doesn't
offer pleasant reading, let alone eating:
