Alternative Price Indexes Reveal True Cost of Living and Economic Trends
Economists and statisticians traditionally measure cost of living through complex official indices, but simpler, product-based comparisons have gained popularity for illustrating purchasing power and price levels worldwide. One of the most famous is the Big Mac Index, introduced 40 years ago by The Economist magazine to explain purchasing power parity (PPP) through the price of McDonald's Big Mac burgers across countries. Switzerland tops the list as the most expensive, with Israel ranking fifth at $6.36 per burger, slightly above the U.S. However, Israel’s high ranking partly reflects a strong shekel rather than actual local affordability.
Following the Big Mac, The Economist also created the "Latte Index" in 2004, comparing Starbucks latte prices globally to provide a lighthearted yet insightful look at living costs and exchange rates. Although no longer regularly published by the magazine, similar indices continue to circulate online.
The iPhone price index offers another perspective on cost of living, highlighting how taxes and import duties inflate prices. According to Deutsche Bank data, Turkey has the highest iPhone 16 Pro price at $2,182, followed by Brazil at $1,835, both significantly above U.S. prices due to heavy taxation. In Europe, Sweden is the most expensive for iPhones, while Switzerland, despite its high Big Mac prices, offers the cheapest iPhones. Data on Israel was not included in this comparison.
The Bloomberg Billy Bookcase Index uses the uniform IKEA Billy bookshelf to compare furniture prices worldwide, reflecting local economic conditions. The last Bloomberg report from 2016 placed Israel third most expensive after Egypt and the Dominican Republic.
Distinct from price comparisons, the Lipstick Index, coined 25 years ago by Estée Lauder heir Leonard Lauder, tracks economic downturns by observing increased sales of affordable luxury items like lipsticks during recessions. This phenomenon, explained by JP Morgan as consumers seeking small indulgences amid financial stress, continues to serve as a recession indicator. Estée Lauder’s recent quarterly sales growth suggests consumers may be bracing for tighter economic conditions ahead.
These alternative indices provide accessible, relatable ways to understand economic realities, cost of living, and consumer behavior beyond traditional statistics.
