An Economic Index for Sex? | Dollars and Sex | Big Think

An Economic Index for Sex? | Dollars and Sex | Big Think

University classes are starting so I thought I would write a blog post that would encourage students to think about the world. This idea came from a project that was done a few years ago by a group of my students in my Economics of Sex and Love class, so I thought it would be perfect.

You have probably heard of the Big Mac Index which is produced annually by the Economist magazine. The point of the index is to make exchange rate theory more palatable by giving a real world example of how purchasing power parity holds (or does not hold) around the world. They do this by comparing the price of a fairly uniform, tradable good—the Big Mac—in about 120 different countries. The idea is that by converting the foreign price of a Big Mac into U.S. dollars we can determine if a country's currency is either over- or under-valued relative to the U.S. dollar. This tests the theory that exchange rates adjust to make the purchasing power of currencies equivalent across countries.