This article is from the archives of the UB Reporter.

Electronic Highways

Published: February 7, 2008

Desperate times, desperate economic measures?

When it comes to economic data, forget about inflation, interest rates and stock prices. Big Macs, lipstick and Super Bowls are the true measures of economic activity. Well, probably not, but it’s fun to speculate. Here are some alternative ways to make sense of the economy.

Currency exchange is not an easily digestible topic, but “burgernomics” may go down easier. The Big Mac is the same everywhere (two all-beef patties, special sauce, lettuce…) and yet its price varies wildly from country to country. As a result, the Big Mac Index provides a surprisingly accurate measure of currency values across countries.

To understand the economy, the lipstick theory suggests that increased lipstick sales indicate an economic downturn. The reasoning goes that women look for cheaper ways to pamper themselves when times are getting tough. Another theory ties economic outlook to the length of skirts—the gist of this one is that as the economy brightens, hemlines heighten. Makes you wonder what an equivalent indicator might be for the male of the species—golf balls, goatees or maybe beer guts?

Daniel Gross’ “Moneybox” column in Slate magazine is a great source for fascinating and obscure economic indicators, like the Guns-to-Caviar Index, which compares “how much money the world spends on fighter jets (guns) versus how much money the world spends on private business jets (caviar).”

Researchers love linking presidential performance to the economy—one study finds a connection between presidential approval ratings and stock markets (stocks go up when ratings go down) and another connects the third year of any president’s term to up-ticks in stock markets. In truth, there’s little evidence these are causal connections, as presidents hold little sway on the day-to-day meanderings of markets. Indeed, this November’s election, regardless of who wins, will likely have no predictable market impact.

The real power to impact economic change lies with the Federal Reserve. However, even Alan Greenspan once said that being Fed chairman taught him “to mumble with great incoherence.” Most experts acknowledge that no one fully understands the economy. It’s enough to give you a headache… wait, there’s an indicator for that: the aspirin count theory.

The same goes for stocks. Burton Malkiel wrote in his classic book “A Random Walk Down Wall Street” that "throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts." Since 1988, The Wall Street Journal has held contests inspired by the book, and guess what? The darts generally do as well as the experts.

And the Super Bowl connection? The Dow apparently goes up 80 percent of the time when the NFC team wins. Talk about incoherent mumblings. We all know that the only thing the Super Bowl can predict is that if our local team is playing, disappointment surely will pervade Buffalo in the game’s wake.

—Charles Lyons, University Libraries