The economy can be a mysterious thing. Those who have made their fortunes through successful investing can seem more like oracles than scientists, possessing an innate wisdom or arcane knowledge that gives them mystical insight into the future value of money and goods. Turning a few dollars into a few million will make anyone want to imitate, or at least listen to you. How do they do it? How do those wizards of Wall Street make the decisions that put them in the penthouse while the rest of us languish in the lobby?
The answer, as often as not, is by looking at signs of how the economy is doing. These signs, known as indicators, help those with a keen eye to judge the health of an economy. Sometimes it goes the other way. For example if we know that people will have less money to eat out, we can predict they will purchase more canned goods. This was confirmed in the UK by the Baked Beans Index, a statistical measurement of the rising value and sales of baked beans. A savvy investor who knew what lay ahead could have bought shares in Heinz and cleaned up.
Some indicators are fairly straight forward. The Consumer Confidence Index, released monthly, is a survey of thousands of households that just asks people how they feel they are doing, how they feel the economy is doing, and how they think it'll all be going in six months. The more optimistic they are, the more you can believe they'll be spending and investing instead of hoarding. That's very useful, of course, but it's also pretty boring.
Here are five funny economic indicators that sound bizarre but have been shown to be fair barometers of economic weather.
5 The Pretty Waitress Indicator
Also known as the Hot Waitress Economic Index, this measures the number of people in service industry jobs with above average sex appeal. It is assumed that more attractive people have an easier time finding higher-paying jobs in good economic times and, therefore, the more that are forced into lower paying jobs, the worse the economy is.
This indicator is actually more useful than some other employment indexes because while employment tends to lag behind economic growth, sexy people find work faster. This basically means that the next time you order a caramel machiato and your barrista is no longer a struggling lingerie model but the usual hobo-bearded tattoo aficionado, you can hit the stock market with a little more confidence.
4 The Big Mac Index
Fun fact: No country with a McDonalds has ever attacked America. Another fun fact: You can gauge the relative value of a currency by the cost of a McDonald's Big Mac in that currency vs. the price in American dollars.
The Big Mac index is based on the idea of purchasing power parity. Purchasing Power Parity is the concept that two identical products and services should cost the same thing in two different countries. If they don't, the exchange rate is theoretically off. Let's say that the current price of a Big Mac in the USA is, dare to dream, $2 and the same Big Mac in Mexico costs $1 American. That would mean that the Mexican dollar is undervalued by 50%. Theoretically, the Mexican burger should cost the equivalent of $2 in Pesos.
It may sound silly – and the tastiest index of them all did indeed start as a joke – but there have been a slew of scholarly papers addressing the Big Mac Index and it is indeed used as a genuine indicator of relative currency values.
3 Cemetery Plot Index
Some things you buy and you think, well, that takes care of that. I'll never have to buy another one of those again. One of those things is undoubtedly the cemetery plot. A cemetery plot, much like a wedding ring, is something you never expect to sell before you use it. It can therefore be assumed that times are pretty tough when rising numbers of people put their future eternal resting places on the market. That, or they've found a cure for death. Whichever.
Real estate is a great commodity and grave sites are no exception. There's much more limited space available in a cemetery than in a city and, at the risk of sounding morbid, you know the space is going to be needed. Therefore, when someone buys their plot, they can find themselves holding a piece of land that's risen in value a great deal. Economists can look to the number of people who'd rather keep the plot vs. sell it as a measure of economic desperation.
2 The … Uh... ‘Johnson’ Indicator
They could have called this the testosterone level economic indicator or the male hormone level indicator but, no, they termed it the Penis Length Correlation. The idea goes like this: There is a correlation between risk taking behavior and economic performance, and there is a correlation between testosterone levels and risk taking behavior. Therefore there is a correlation between testosterone levels and economic performance. Penis length, gentle reader, correlates with testosterone levels. All this is reported by Tatu Westling of Helsinki University, who is probably the most unorthodox economist I've heard of.
Moderate risk is important to success. Too much risk taking leads to folly and too little leads to stagnation. According to Westling, countries with below average and above average penis sizes tend to underperform compared to averagely endowed nations in just those ways. So, apparently size does matter. At least on the national scale.
1 The Men's Underwear Index
If you want to know if the economy is ill, just ask Alan Greenspan about men's underwear. He, along with many other leading researchers and economists, understand men in a way that many women wish they did not. They, along with despairing girlfriends and wives the world over, know that a man will happily save money by reusing the same underwear until it can no longer be described as a garment.
When the economy takes a downturn, so do the sales of boxers and briefs as men realize that not too many people are going to be seeing them in their Calvins, anyway. To we of the less fair sex, underwear is often considered a formality at best and a necessary evil at worst. A wily economist can do some good recon by going to the local WalMart and seeing how full the discount briefs section is.
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