Last week I read a very interesting piece by Antonio Cabrales (who in turn was recounting a story told to him by Loris Rubini) on the anti-inflationary “policies” that the Argentinian Government is adopting in the face of what now seems to be a very “hot” issue (clue: look at #1 on the list).
I thought it would be a good article to translate and share in English for three reasons: a) it’s hilarious; b) it’s revealing; c) it’s good practice for me!
Argentinian Anti-Inflationary Policies (via Loris Rubini)
(featured on Nada es Gratis)
Anti-inflationary policies in Argentina have always had one factor in common: originality. It seems like it matters less that the fundamental theories are solid – what they’re really looking for is to surprise the world with something new or audacious.
Lately, this has been going on in the construction of price indices. The prices of goods that are part of the (CPI) basket tend to increase less than the average (of all) prices. As a counter factual, it is very difficult in reality to buy those goods. For example, “semi-skimmed milk with iron and calcium” is part of the basket. However, if one goes to the supermarket, she finds semi-skimmed milk, milk with iron, milk with calcium, as well as semi-skimmed milk with iron or semi-skimmed milk with calcium, but she will not find semi-skimmed milk with iron AND calcium.
But this strategy has a problem. Even though Argentinians can “manage” our internal indices, surely we cannot manage the Big Mac index. Or can we?
Based on the latest edition of the Big Mac Index (28th Jan 2011), The Economist compared official inflation with increases in prices of Big Macs in a group of countries. The conclusion is that the majority of countries “massage” their price indices, which rise less than the rise in the price of the Big Mac. But the difference tends to be small. For example, in Europe, the price of a Big Mac rose around one percentage point more than the CPI. In Argentina, the price of the Big Mac rose almost double that of the CPI. While the official CPI rose by 10% in 2010, the price of the Big Mac rose by 19%.
To remain faithful to our history, our minister of interior commerce, Guillermo Moreno had an idea (an original for sure), to once again combat this “inflation a la burgernomics”. Moreno managed to persuade the McDonalds chain to fix the price of a Big Mac relatively lower, approximately $16 (US$ 4), while other comparable sandwiches cost around $21 and $23 (US$ 5.25 to US$ 5.75). The Double Whopper in Burger King costs $23 (US$ 5.75).
Well, the Big Mac isn’t the same as semi-skimmed milk with iron and calcium. If one goes to McDonalds, by internal franchise rules, one is always able to buy a Big Mac. While this is true, when one enters a McDonalds in Argentina, she sees supremely tempting hamburgers in promotions in all sorts of colors. They have luminous advertisements for quarter-pounders with cheese, the chicken sandwich, and even a Triple Mac®! But the Big Mac is well hidden…