By Migl Petrauskait and Erwin R. Tiongson

About the author: About the authors: Migl Petrauskait is an ODI global fellow serving as senior economist at Uganda's ministry of finance. Erwin R. Tiongson is professor of the practice at Georgetown University's Global Human Development Program.

How much do we really know about the size of the world's economies?

It depends on how we measure them. Most measurements rely on international price comparisons -- better known as purchasing power parity, or PPP. It shapes everything from global poverty estimates to the International Monetary Fund's r anking of economies. Just last week, the IMF released its annual World Economic Outlook, within which it compared growth rates of the world's economies in PPP terms. These numbers influence how we compare growth, allocate resources, and even structure global institutions.

For example, should China -- which now exceeds the U.S. in PPP terms -- have more votes and influence at the IMF than the U.S.? Should the IMF be based in Beijing instead of Washington, D.C.? If economic size dictates global influence, then these numbers have real consequences.

But here's the problem: PPP calculations are riddled with hidden distortions. And when the data are wrong, so are the conclusions drawn from it.

How We Measure International Prices

International prices are measured using a range of methodologies, each attempting to capture the relative cost of goods and services across countries. The most formal effort began with the International Comparison Project in 1968, a global initiative launched by the United Nations and the University of Pennsylvania. The ICP introduced the idea of PPP as a way to compare the real value of currencies by stripping out exchange rate distortions. It evolved into a major undertaking led by the World Bank, which produces periodic reports that benchmark prices across economies. The OECD's PPP Manual formalized these concepts further, laying out technical guidelines for measuring international price levels. These efforts rely on massive data collection exercises, pricing thousands of goods and services -- from a haircut in Kigali to a loaf of bread in Paris -- to create a comparable cost structure.

And then there's the Big Mac Index -- a lighthearted take on PPP introduced by the Economist in 1986. Instead of complex price baskets and GDP deflators, it boils everything down to one globally ubiquitous product: the McDonald's Big Mac. The idea is simple: if PPP holds, a Big Mac should cost the same everywhere when converted into a common currency. If it doesn't, a currency is either over- or undervalued. The index, though often dismissed as a gimmick, has become a go-to reference for quick comparisons.

But even when we manage to compare apples with apples, or Big Mac to Big Mac, there's one crucial factor we often overlook: time.

The Hidden Cost of Waiting

Waiting is possibly one of the oldest human experiences -- we wait for a new day, we wait for the next harvest, we wait for people we care about to return . And yet, for most economic metrics, including PPP, waiting simply doesn't exist. But a product's price tag tells only part of the story. Access matters, too. If a worker in one country has to spend two hours in line to buy the same product that someone elsewhere can grab in two minutes, is the true "cost" really the same? The same logic applies to services: a bus ticket might be cheap, but if the ride takes twice as long due to congestion or unreliable infrastructure, the economic reality isn't captured in price comparisons alone.

So we may assume a Big Mac in Manila is the same as a Big Mac in New York. But what if it takes 10 times longer to get one? That extra time has clear economic value, yet it's hardly ever accounted for in global comparisons or the calculation of PPP.

Take the Philippine peso and the U.S. dollar. The market exchange rate is about 58 pesos per dollar while the Big Mac Index says it should be 29 pesos per dollar -- suggesting the peso is undervalued. But that calculation doesn't account for the time spent waiting. In the U.S., the average wait time at McDonald's is 2-3 minutes. In the Philippines, online reviews suggest it's closer to 20 minutes or more, which is consistent with our own experience. If we assign a monetary value to this waiting time and factor it into the price of a Big Mac, we get an adjusted exchange rate of 40 pesos per dollar instead of 29.

This might seem like a small tweak, but it shifts the Philippine economy by hundreds of billions of dollars. Depending on whether we use the original Big Mac index exchange rate or the wait-time-adjusted one, the Philippine economy could be seen as either a $906 billion or a $669 billion one -- a $237 billion difference. And if something as basic as a burger can throw off our understanding of exchange rates, how much bigger are the errors in GDP calculations, global rankings, and poverty measures?

Wait times can vary widely, but it is often more pronounced in lower-income countries, where people spend more time securing a loan, waiting for permits, accessing basic services, or collecting water. And wait times are often disproportionately borne by women and children.

Seen this way, the work of international development is, at its core, about shrinking wait times -- ensuring that access to water, credit, education, and healthcare isn't measured in hours, days, or generations. One can even think of deprivation in terms of infinite waiting time -- the promise of something valued, never delivered.

We have learned so much about the world since the first attempts at measuring international prices. But so much is left unmeasured. What's clear is that waiting is built into every transaction, no matter where you are in the world. Every item in the basket of goods and services used for global comparisons comes with its own hidden delays.

And yet, in 280 pages of the PPP manual, wait time isn't mentioned once. Nowhere in these calculations is there room for the minutes, hours, or even days lost in that fleeting space between purchase and consumption -- even though what's at stake is nothing less than the size of the world's markets and the weight of economic empires.

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April 25, 2025 16:46 ET (20:46 GMT)

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