Big Mac Index

Recent blogging about the price of soda reminded me of the Economist’s occasional Big Mac Index feature which purports to offer a quick-and-dirty look at Purchasing Power Parities. Actually looking at the results, however, it seems to me that it’s really telling us more about low-end wages. Big Macs are incredibly expensive in Scandinavia not because the currencies are overvalued but because people in the bottom half of the Scandinavian wage distribution earn more money than people in the bottom half of the US distribution. If you did an index based on some good that has the labor of skilled professionals as a major cost input (a routine medical checkup, for example) you’d get the opposite result.