This is a fun little bit of data calculation and visualisation. It's a database and then mapping of the global price list for Apple's iPhone 5 s. And there are two interesting ways of using it. The first is simply to look at how prices differ around the world:


You can do this in USD or GBP as you wish. And this can be used to explore the violations of Ricardo's Iron Law of One Price. Which is where David Ricardo insisted that the prices of traded goods would inevitably move to being equal all over the world. Well, equal minus the transport costs of getting them around the world. And transport costs for an iPhone are trivial: it would be amazing if Apple were paying more than a couple of dollars to airfreight one to anywhere at all. So, we would expect prices to be the same everywhere: but they obviously are not.

The major reason of course is governments. The prices used include sales taxes (and for the US, Californian ones are used for the whole country) and those obviously vary in each taxing jurisdiction. Then there are also various places that have import taxes on electronics. So, that's part of the iron law violation, governments imposing taxes.

There's also a second, much more minor one in there as well. Apple, just like every other company, operates at "price points". No one at all goes out and sells something at $501. This might not be entirely rational but it is the way we humans see things, that $499 is much cheaper than $501. Certainly, we all act as if it's much more than $2 cheaper. So price points are going to be at $499, perhaps $489, $449, instead of $451. However, Apple is selling in multiple currencies here and those psychological price points won't be at the same price when converted into just the one currency, the GBP I've used here or the USD that you might prefer to look at.

Then there's a second version of the information which looks at the GDP of the country where the sale is being made. And it also converts to PPP GDP, which is where we try to look at what goods cost on the local market. This is slightly odd as the price differences that we're trying to measure in PPP are not those of traded goods, like the iPhone 5, but of non-traded goods like rent, or haircuts, or locally produced food. But still, we get a fun map:


Which gives us this fun information:

The iPhone 5S price index we’ve created shows the relationship between the price of the phone and the national GDP (PPP) per capita for all countries where it is available. The map below gives a quick glimpse into where the phone is the most expensive (or cheapest) for people based on their average GDP. China is currently the most expensive with the iPhone 5S price being 9.55% of the average GDP. Whereas the USA, Apple’s home country, is the cheapest, standing at just 1.15%.

All of which is, I hope you'll agree, most fun.

However, when The Guardian reports on this something appears to go wrong. Not their fault I suppose, it's about economics and lefties never really do get that subject. But here:

Similar to the way the Economist tracks the cost of the ubiquitous McDonalds burger across countries, nations and states, Mobile Unlocked tracked the price of the iPhone 5S across 47 countries in native currencies with native sales tax, and then converted those prices into US dollars (USD) or British pounds (GBP).

No....the Big Mac Index operates entirely and exactly the other way around. We need to make the distinction between traded goods and non-traded goods. The Iron Law only works on traded goods. What we're trying to find out with PPP calculations is what are the price differentials of non-traded goods? Which is why the Big Mac is used. It is (supposedly at least) exactly the same all over the world. It is also made almost entirely from local produce bought at the local price in local markets. US Big Macs use American beef, Argentine ones Argentine and so on. So we get to see the impact of local prices on the same product worldwide. That's what we're actually attempting with that Big Mac Index. The Economist then goes on to compare the prices of this non-traded good with exchange rates and attempt to work out whether the exchange rates are correct or not.

This is entirely different from using the price of a traded good to measure local price variations. For what we're going to be measuring here is what interventions there are into stopping the Iron Law working, not what local price levels are.

And there's one final point to be made. The real price variations (ie, not those PPP adjusted ones) aren't quite right. For they are calculated from official prices, including all taxes. And we know very well that (for example, in China) there is a thriving trade in buying cheaper phones in Hong Kong and taking them back to the Mainland. Meaning that the market price is going to be a little lower than that official price as a result of some of those taxes being avoided. Which is why Ricardo's Iron Law does in fact work of course. Because if there are price variations in a tradeable good then people will trade it from low price areas to high. And as that happens the prices will tend to equalise. Not perfectly, to be sure, but the equalisation will happen.