The next installment of UNF Insights explores some problems associated with using what economists call “Purchasing Power Parity” (PPP) to assess what each member state must pay in dues to the United Nations. Readers of The Economist might recognize the term from the magazine’s periodic “Big Mac Index,” which uses the price of a McDonalds hamburger to compare economies around the world. In short, PPP is a way to measure comparative standards of living by comparing the price of a “basket of goods” in one place (i.e. a Big Mac in Bengal) to the same “basket of goods” elsewhere (i.e. a Big Mac in Bologna.)
When applied to the price of a hamburger, PPP gives harmless anecdotal evidence about the relative strength of economies. But if used to calculate UN dues – as some key member states have argued – it would have debilitating consequences for UN operations. To find out why, click here for my short essay on the topic.