 And anybody want to volunteer to be first, if you have questions, we'll start with Professor Rieger. I have just a very basic question, and I'm sure this is a question that would interest many of us. I'm intrigued by this measurement of big max per hour, which is very graphic and helps us see certain things. But in terms of a quantitative assessment, how does that relate to livability, quality of life? The ability actually to make a decent living, not just to have housing and so on. But is this a wage rate that actually is sustainable and sustains a family? Well, that's a good question. The U.S. example is one. We... Wage rates in the U.S. for people working in McDonald's range now, we know. But they're less than $10, typically. So now typically more than the... I only know this because we collected these data this summer. Typically more than the federal minimum in most states, which is seven and a quarter. That's the federal minimum. There are some states, a lot of states that have higher minimums. So if there's a higher minimum, of course, they may make more. But I would say between... The market wage is not below eight hardly anywhere and probably doesn't go much above 10 or 11. Now the question of, can you get by on that? If you work 2,000 hours and you have a family, you're below the poverty line. So it would take two people working 2,000 hours to get to that and just be barely above it. So it's extremely... I mean, the interesting... It's a very low rate of pay. But it makes you realize as low as it is, think about how low it is in the rest of the world. Yeah. The average income per head per day in the world up till the beginning of the great enrichment in some countries in the 19th and 20th centuries was $3 a day. And the average in the United States now is $130 a day, which includes these four workers. So it's really rough to get along, even in St. Peter, at $3 a day. Your appreciation of the problem depends a little bit on whether you've been to someplace like India, where... I mean, there are dimensions of the quality of life that are fine, but people are very poor. On the other hand, usually poverty is a relative factor in most of those mines. I mean, you can think of it as a subsistence level thing that would tell you how much you can get by on. But most people, I think, think of something like half the median income might be a poverty level, and certainly the minimum wage rate working at McDonald's isn't going to get to that. It's not very high. On the other hand, it's an eye-opener, I think, for people to realize how privileged we are. In some sense... Here's the way I think about it. In some sense, getting your country... Getting the country up to $8 an hour for everybody. So anybody who works at all can get at least that much, working on a regular basis. That's a challenge that the world hasn't actually managed to live up to at this point. It's a big challenge, but it's a... That's sort of the challenge of development economics, is to get... Once you grow that way, the inequality issues are not quite the same. Then once you reach the level where you have a stationary growth path, which the US is more or less on, then I think inequality issues, they materialize in people's minds more. So, building on this question, if the McDonald wage is kind of the bottom of the economy, how good of this is a representation of the economy as a whole? Because if we think that some countries, the income gap is increasing, some of them the middle class is changing, and all of these things are differentially affected in different countries, what is the limitation of this index? And what kind of other index would you like to have if you wanted a similar thing for maybe middle income and high income? Yeah, lots of... The middle income, so I think the answer to your first question is if you think of the ratio of someone at the median wage, which is maybe $18 an hour in the US, $18.20, for the average hourly earnings sake, take that to the... That's still not very high, but you take that ratio to the wage of McDonald's, so it's like two and a half to one. If the US economy grew so that the guy in the middle doubled, I think the guy at the bottom would double too. Our problem is we don't have any doubling, and it's an eye-opening to see something like China having doubling of wage rates two and a half times in seven years. I mean, if we had something like that, it would just be eye-popping, but we don't have the ability to go... We have to make new technology in order to get our productivity higher, and they can really basic disengage in getting to the production possibility frontier. But it's unclear if a new technology would help anybody on the bottom or whether it would only help people to talk? I think things tend to go up, so people worried about this in China because it's true that in China there's been a big increase in inequality, but there's no question. In fact, I talked about this work in China. It was very reassuring for some of the Communist Party folks because they wonder too whether or not the corruption and other problems is creating these phenomenal empty apartments in Miami or whatever it is. So they were relieved too. I think clearly that that economy, in some sense, when the wages at that kind of pitched level grow, it is a sign that there's real growth in the economy, and you're not in a situation where you're just taking from A to give to B. So the middle, and this is kind of a point on the distribution below the middle, it probably also would be related to a point above it. But your second question, which is really interesting one, which is how do you get, would it be possible to get a measure that had the same characteristic of allowing you to get people who are doing more or less the same thing in different places? I've thought about that. We've thought about it quite a few times. There's a few things you can think of, but most of them, the access to the data is very difficult. One of the ones I thought of once was like a Coca-Cola distributor. They make Coca-Cola and bottle it more or less the same way all over the world, whether you like it or not, by the way, all over the world. Because they're concerned about sanitary, it's safety, it's all about product safety. They're concerned about it. And so probably they have a similar kind of ideas to the way that they run. They franchise bottlers, but I think they probably have a similar way. The thing is I can't figure out how to get to the information. Forget the practical aspects. What will be your ideal product? So for example, I was thinking that maybe mattresses would be really interesting. Huge price range, very little knowledge. It's kind of basically a lot of disposable income is putting into this. And you assume that the more you have, the better the mattress will be, but it's kind of a good measure of just how much money do you have to give away without knowing much about it? Well, one of the reasons we use the Big Mac price in part is there's actually a long data set on prices of Big Macs, which goes all the way because the economists collects it. We've correlated our data with theirs. They're pretty close. And they discovered when they started to collect so that their theory is that when Big Mac prices get out of range of the exchange rate, there's going to be an appreciation or a depreciation of the exchange rate. There is truth to that. There's evidence for that. It doesn't work so well when you're looking at developing countries. And the reason is for that, because of that concave function I showed you where the real exchange rate appreciates as you come out when you're on the growth path. So that is something that doesn't get accounted for in that. But we thought of it. And then there's a whole literature, there's a wonderful paper explaining which parts and actually sort of testing the idea of the pricing that takes each component of a Big Mac. It's just in the economic journal if you're interested. It takes each component and then tries to figure out whether the prices of what the price of a Big Mac is related to the price of those components and the untrated part of course is labor. And it seems to work pretty well. So basically the part of the Big Mac, which is tradeable, it does respond to exchange rate changes, but of course the wage rate doesn't because it's a non-tradeable good. That's an interesting point that's not really, many Americans don't appreciate because we're such a high wage rate that we think of everything as more or less being tradeable. But it's not really, I mean the barber has to make as much money as the manufacturing worker. Otherwise it all become manufacturing workers. But our manufacturing workers make pretty high wages. So we don't think of it as being a big issue, but it's a giant issue when you get a haircut in India and get a fantastic haircut for almost nothing. But you know there's a longer term economic point, tradeable versus non-tradeable goods that because of arbitrage, because of competition among industries and occupations and so on, the prices of tradeable goods will eventually affect non-tradeable goods. There should be some long term relationship between them. Well that's related I think to your point which is that when you think about a tradeable goods, think of an iPhone. By the way you can get the data, people that make your iPhone make about $2 an hour and most of them have never even seen an iPhone. They don't get to see the assembled part. But you think of an iPhone, which is you can buy everywhere. And I'm not quite sure why that is. There could be some non-competitive reasons or maybe some taxes or others. But the interesting thing is it's still the case that you're not comparing something which is just a raw good. It's an iPhone. So it's like you say, I mean maybe you can get a galaxy something or other. It works just as well and it only costs half as much. So then in a way you have to be very careful. That's why when I try to use the Big Mac index, the price, I'm thinking of it, I'm trying to lay out exactly what it is and use it for comparisons across over time. But I wouldn't claim that I would compare it with the price of a mattress. I don't think you've quite responded to Professor Rieger's point though. I think you were saying, allow me to interpret for you that man does not live by Big Mac's alone. And by comparing Big Mac's or income per head for that matter, we may be reducing the human experience to bread. Is that what you added? That may be one part of the question. Another part of that question is, does it allow you to live a dignified life? That's another way of framing what you just said. And then you could add to that question the other question that we haven't touched on yet. This morning we didn't touch on it either. We talked about corruption and agents of corruption. We talked about the police. But we did not talk about large corporations who might be part of that game. And here of course we have to talk about wages at the top. And so the difference here is not merely how do we raise questions at the bottom, but how does that relate to how everybody else lives, how the rest of the population lives. If you look at the Big Mac factor in a poor country, that's one thing. If you look at it in this country, it's another question. And then you have to answer all these questions. How does dignity relate to it? How does a McDonald's worker relate to somebody who's not a McDonald's worker, a university professor, a manager of a corporation and so on in a particular social context? So bringing all of that together, the question is what does it really mean to look at those kinds of data? And my question for you is how could they be helpful for us to ask these bigger questions? Well, let me take the first part. Because I didn't respond to that really. What does it tell you about the value of your life? The value of your life, how you're living, how happy you are in some dimension? Because you certainly don't have to have material goods for everything. And there are some things, most economists don't try to measure other things like that. There are exceptions, but most people don't try to measure. I occasionally dabble in trying to measure things like that, but very difficult measurement problems are probably not something most economists try to do. There are some exceptions. A good example would be environment. So clean water, environmental pollution, these are things which clearly have both effects on the quality of your life, but also on things that are related to other aspects of your quality, directly as well as things that are related to the quality of your life indirectly, like how long you live, or whether your children have problem learning in school or something else. So those are probably economists would be interested in that, but it's much harder to say something using measurement tools like the ones I have about the broader question of, there are measures of happiness. People ask directly, how happy are you? And some people, there are many anomalies in the happiness measures. They do seem to go up with income. Up to a point. No, they go up in a concave fashion. But then there are many puzzles, like why are the Danes so much happier than the French? No, the surface of it doesn't really look obvious. But there are indirect measurements people use. Psychologists mostly and sociologists have used them. A lot of economists use them now, and you can ask whether, the thing is there are so many aspects of those measurements that are fascinating that respond to your question. For example, people that lose a limb, you would think a person who lost their limb would be very unhappy. And the evidence is that when they lose a limb, they become very unhappy, but then they recover. Their happiness, they come back to another level. So I don't know whether that means the measurement isn't really telling you how happy they are, or whether it tells you that we can all get used to everything. Maybe it does. You might use some basic measurements, like for instance education. I mean somebody who loses a limb depends on healthcare. Those kinds of things can be measured to some degree. Now what that means for the rest of your life is another question, but there are some qualifiers I think that might actually help answer that question. Well, that's true. That's absolutely true. Health is a pretty good example. So I don't know the answer to this, but it wouldn't surprise me if the wage rate at a real big max per hour was probably correlated with mortality rates. Longevitys are probably higher in countries with, I don't know, but that's something I could actually do. There is the question about longevity. I think it is true that longevity of Russian men is finally going up, whereas it had been going down for a long time. But yes, longevity, and of course it plays a big role in thinking about the economics of health because there's the question of, and it gets very sticky, because there's the question of, well, let's take a simple example in healthcare. Kidney dialysis. If you have kidney failure, you either have dialysis or you die, or I get you another kidney. I can do a kidney transplant. Kidney dialysis costs $50,000 a year or more. We all agree in the United States that you're entitled to kidney dialysis. We know that because there's an amendment to the Social Security Administration that provides it free of charge to every American, regardless of your age, anything about you. So kidney dialysis is one of those examples where we have universal healthcare. Probably we're all happier with that, but it's difficult. I couldn't put a price tag on it. I mean, how would you actually... We clearly voted to do that. We all know that we could be the one that gets the kidney dialysis. They might need it. We don't know. Anyone at this table could come to a point where they need it, but it's hard to say how you put a price tag on that. But I appreciate it. In healthcare, it's especially important because a lot of times you're thinking about, are you going to spend extra money on something? And then the answer, the question you give back is, well, so how much does that preserve life? And of course, it gets worse because then you really want to ask, well, in what quality of life? So people have things they call the quality of a life year. I have a very... Those are a little amorphous for me, so I'm a little hardcore. Can I interject and just have one question from our audience? We're going to have to cut this short so we can stay on schedule, but we'd like to at least honor our audience with one of their questions. In the U.S., if red and blue states are overlaid on the real wage map, red states appear to have lower real wages. Why do lower real wages seem to correlate to red voting patterns and higher wage rates to blue? Now that is a fascinating question. It's a deeper question, actually, than we can really respond to. It is a fascinating fact, it's been known for a long time, that if you look at the relationship between voting blue, let's call it blue, because I know nowadays blue can be in green or something else, but let's say the probability you vote blue, that's an increasing function of income in every state. I'm sorry, a decreasing function of income in every state. Voting red is an increasing function of income in every state, and yet if you take state averages, it's negative. So the point that was made by that questioner, which is the richer states vote blue and the poorer ones vote red, that's true, but at the same time within the blue states, the richer people vote, are more likely to vote red. So there is this deep puzzle as to how it is that the aggregation of people into states, which is so important for a political process, creates this situation where the micro-relationship is not the same as the macro one. And I don't really know the answer to it. When you say to someone, higher income people are more likely to vote red than blue, you say, oh, that's understandable, that's the Republicans and such. But then you say, but the states where they have a lot of high incomes, they actually vote blue. So what's going on? It's a mystery to me. I don't understand it either. I live in a blue state, of course, New Jersey, which is probably about as blue as they get. But I don't actually understand why it is. It's a puzzle. Well, unfortunately, we're going to have to leave that puzzle and many others to be answered hopefully over the next day and a half. So we will break now and come back to here, Professor Rieger, at 3 o'clock with some music preceding that. So thank you very much.