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Sherman Dorn

Log scales would have invariant differences. They're the logical choice.

derek

Economists are often trying to get around the problem when they talk about a "basket of goods". The basket is an artificial currency invented to avoid giving one currency the privilege of being the standard.

Economics isn't the only subject where this happens. In chemistry, the relative enthalpy change of various reactions is obtained by subtracting the absolute enthalpy of the products from the absolute enthalpy of the reagents. But there is no absolute enthalpy! What to do?

Chemists have resolved the problem by defining an absolute enthalpy of zero for every element in its "natural" state at standard temperature and pressure. So for oxygen, that's O2 gas, and for carbon, that's solid graphite, and so on. You can get any chemical combination from these starting points, but the starting points had to be arbitrarily assigned.

For this graph, maybe you could take the Big Mac as a basket of one good, and divide all the currencies by it. Now the dollar has a value in "Big Macs", that can change as the dollar price of Big Macs changes. I wonder why the economists who talk about the "Big Mac Index" bother to divide by the dollar, instead of doing that? Maybe they worry that if they don't put that extra layer of obfuscating calculation on, the absurdity of the whole "Big Mac Index" idea will be too obvious to all.

Daniel Pope

Would a graph from 0 to ∞ where 1 is the baseline not be better than one from -1 to ∞ where 0 is the baseline?

Thus a Chinese Big Mac costs 0.4 US Big Macs, rather than a rather abstract -0.6?

Dominique Zosso

Ever thought of choosing a logarithmic scale? Such a scale makes ratios "shift invariant". I.e. a ratio of ten has always the same length. Therefore, the chart looks the same, no matter what you chose as "standard" currency, except for the location of the zero.

Also, the range becomes -infty .. +infty, which is more reasonable and symmetric. 10-times cheaper (i.e. 0.1) will be at the same distance to the left as 10-times more expensive is to the right (i.e. 10).

Tom West

Dominique Zosso said "...10-times cheaper (i.e. 0.1)..."
Can I just say that I really hate the phrase "ten times cheaper". Why not just say "one tenth the price"?

Expensive Swiss Big Mac

I agree with the comments recommending a log scale. I believe it is usually the right choice to use a log scale for fractional quantities (like percentages).

Using a log scale, the bar representing a Big Mac that costs half as much as the reference country will be the same length as the bar representing a Big Mac that costs twice as much. They will just go off in different directions from the middle of the plot.

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