Burgernomics and Travel Buys
The lesson: Buy Ruffles in Myanmar
Chips for 8 cents a bag! Economics isn't dry when students go comparison shopping in the global market.
By Janet Eastman
Sunday April 23, 2006
A BOTTLE of Corona costs $8 in India. In Vietnam, $8 will buy 10 bottles of that same beer.
A small bag of cheese-flavored Ruffles potato chips is $1.69 in Japan and only 8 cents in Myanmar. A plain white T-shirt costs $16 in a mall in Cape Town, South Africa, and a three-pack of Durex natural condoms averages about $2.02 around the world.
These figures are courtesy of college students who collected prices while traveling to 10 destinations with Semester at Sea, a shipboard study-abroad program.
For a price-indexing project in Humberto Barreto's Introduction to Macroeconomics Theory in the fall 2005 semester, the class priced 130 goods and services, including gasoline, phone cards and other necessities for travelers. But because twentysomethings were conducting the study, not Alan Greenspan, they tossed in items rarely examined by economists, including rum, Snickers candy bars and Neutrogena oil-free acne wash.
The project was based on the Economist magazine's Big Mac index, Barreto says. "Burgernomics" compares the cost of a McDonald's Big Mac around the world, with prices converted to U.S. dollars. The exchange rate shows if a country's currency is under- or overvalued based on purchasing-power parity.
Barreto wanted his Econ 110 students to compare not only Big Macs, which are available in more than 120 countries, but also other staples. The students' collective basket of goods and services would be entered into a spreadsheet computer program and analyzed.
"An important idea in macroeconomics is price indexing, which compares prices at different places. Everyone can guess that prices in Los Angeles are more expensive than in places like Missoula, Mont., but comparing the prices of identical goods provides quantitative data to work with," he said. "Precise data refines your thinking."
An example: The average price of a shot glass imprinted with the name of the country is $3.50.
The breakdown, in order of the students' around-the-world itinerary: Venezuela, $2.79; Brazil, $2.17; South Africa, $3.97; Mauritius, $3.67; India, $7.95; Myanmar, 80 cents; Vietnam, $3.14.
There is no column on the spreadsheet for the first stop. Students boarded the MV Explorer in the Bahamas in August 2005 but departed before the class met.
The last two stops -- China and Japan -- are blank on the spreadsheet's box for shot glasses. Despite their best efforts and independent traveling agendas, the students never saw imprinted ones for sale. "They were really apologetic that they couldn't find every item in every country," a sympathetic Barreto said. "I didn't penalize them because that was part of the learning. That's life."
Emily Taron, an international relations major at San Francisco State, chose to study the price of a Big Mac, a liter of gas, a can of Coca-Cola, a postcard and Listerine.
"I was very surprised at how ridiculously cheap the gas in Venezuela was -- 4 cents a liter! That's like 12 cents a gallon. It was also somewhat surprising that McDonald's wasn't in Myanmar or Vietnam. I had been brainwashed to think that McDonald's is taking over the world, so it was very refreshing not to see it there. I'm very glad for the blanks in our data."
Even with missing values and the absence of high-ticket items -- housing, automobiles -- Barreto was pleased with the project as a teaching tool. It raised issues that economists struggle with, such as consistency.
"I explained that it is important to compare the same product in every port," he said. "They can't be looking at Charmin in one country, then generic toilet paper in the next."
The one exception to standardizing the items was charting the "cheapest fifth of vodka." It was 74 cents in Venezuela and $11.36 in India. The average among the nine countries was $4.82.
Barreto said he didn't nix any suggested items based on his shopping habits, sense of taste or the item's legitimacy (bootlegged or stolen). "I would not have thought of putting condoms on the list, but I was open to everything," said Barreto, who took a semester off from teaching at Wabash College in Crawfordsville, Ind., to travel 25,000 miles with a shipload of college students from campuses across the country. "Lots of economics books talk about widgets and fake stuff. Who cares? What we have is a study of products that people really buy."
After crunching the numbers, Barreto and his 34 students were surprised to learn:
* Vietnam was the least expensive when prices of the goods and services were totaled and compared with the other nine places visited. "We could have easily guessed that Hong Kong and Japan would be expensive, but Japan was almost twice as much as Vietnam," he said. The students found that a pack of Marlboro cigarettes was $1.13 in Vietnam, $2.58 in Hong Kong and $2.54 in Japan. A small brewed coffee at a sit-down cafe was 31 cents in Vietnam versus $4.27 in Japan. The average: $1.65.
* A can of Red Bull cost $5.68 in India but only $1.67 on the small island of Mauritius, and it wasn't found in Myanmar, China or Vietnam. Vietnam has its version of a canned energy drink made with bird's-nest flavoring (about 50 cents a can).
* An hour of Internet use was less than $1 in India and Venezuela. Myanmar, ruled by a military regime and also known as Burma, had Internet outlets but restricted access to Google, Yahoo and most foreign sites. The cost varied from $1.60 an hour to $1 a minute.
* A one-hour calling card was 71 cents in Vietnam, while in Myanmar it was $43.20, Mauritius $22.67, South Africa $11.90 and Japan $16.95. The average was $14.77.
* Although Brazil has a reputation as an adult playground, it charged a steep price for some toys: Cosmopolitan magazine was $13.91 (the average was $6.44). A black-market CD from a street vendor was $3.04 (average $2.01). And even the Big Mac, solo, no combo, was an expensive $2.67 (average $1.93).
The students, many of them required to take an economics course, liked the idea of price indexing, Barreto says, because it didn't force them to take a special trip to a factory or watch endless PowerPoint slides. Instead, they earned class credit while they shopped, ate and bar-hopped. In the meantime, they became smarter consumers.
A bonus to Barreto, who wishes he could conduct a similar global project at his land-based campus, were the converts to his field.
"Economics has a nasty reputation of being difficult and having a lot of numbers and tedious spreadsheets," he says. "In a lab, there is usually a canned exercise and the teacher knows the outcome. But this was a discovery exercise. It was mysterious and it had an edge to it. Students were into that."
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(BEGIN TEXT OF INFOBOX)
Face value
Country/city Big Mac Pepsi/ Coke gasoline Internet cafe Postcard
Brazil $2.67 $ .78 $1.05 $1.74 46 cents
China $1.45 $ .90 $ .56 $1.48 28 cents
Hong Kong $1.62 $1.12 $ .97 $1.55 54 cents
India $0.82 $ .74 $1.06 $ .93 30 cents
Japan $2.12 $1.49 $1.11 $3.06 95 cents
Myanmar NA $ .91 $ .67 $1.20 41 cents
Mauritius $1.97 $ .70 $ .97 $2.87 48 cents
South Africa $2.21 $ .78 $ .95 $3.40 69 cents
Venezuela $2.60 $ .54 $ .04 $ .82 68 cents
Vietnam NA $ .58 $ .62 $ .62 24 cents
*1 liter = 0.264 U.S. gallon