The Big Mac Should Be Getting Cheaper

the money chart

all series indexed to 2000=100. sources: M2 from FRED M2SL. beef price from BLS APU0000703112. Big Mac price from The Economist Big Mac Index. CPI from BLS CUUR0000SA0.

four lines, one axis, twenty-four years

M2 – the total supply of dollars – grew ~330%. ground beef, the Big Mac's primary input, grew ~231%. the Big Mac itself grew 154%. and CPI, the number that determines cost-of-living adjustments, social security increases, and the story the government tells about purchasing power – claims about 82%

every line on this chart is above CPI. the money supply, the raw ingredient, and the finished product all outran the official inflation measure. CPI isn't in the same conversation

why CPI can't see this

CPI is not a fixed-composition index. that's not a conspiracy – it's the methodology. the Bureau of Labor Statistics explicitly builds in a substitution mechanism: when steak gets expensive, the index shifts weight toward chicken. when chicken gets expensive, it shifts toward beans. the basket changes to reflect what consumers actually buy, which means CPI tracks the retreat from inflation as much as the inflation itself

this is useful for some purposes. it tells you what people are spending. but it cannot tell you what happened to the price of a specific thing over time, because the specific thing keeps getting swapped out of the basket

the Big Mac is the control case. it's a product that cannot be substituted out of its own index because the product doesn't change. when you hold the product fixed and measure the price, you get 154%. when you let the basket shift, you get 82%. the gap – roughly 70 percentage points over 24 years – is the substitution effect made visible. it's the distance between what you're paying and what the index says you're paying

where the price increase comes from

if the Big Mac rose 154% and CPI only captured 82%, what's driving the rest? the obvious candidate is input costs – beef went from ~$1.57/lb to ~$5.20/lb, up roughly 231%. but this answer just pushes the question back one step. why did beef triple?

red dashed: actual historical Big Mac price. green: hypothetical price if only beef input costs changed. blue dashed: M2 money supply scaled to the 2000 Big Mac price.

the green line shows what the Big Mac would cost if the only thing that changed was beef. by 2024 that's $3.28 – a 46% increase. the actual price is $5.69. the $2.41 gap between the green line and the red line is everything else: labor costs, rent, packaging, energy, franchise fees, margin changes – all of which are denominated in dollars, all of which respond to the same monetary expansion

this is the core point. treating beef inflation as "real" and everything else as "monetary" is a false distinction. beef tripled because the entire supply chain – feed, fuel, transport, processing labor – is priced in dollars. when you expand the money supply by 330%, the cost of raising a cow goes up for the same reason the cost of packaging a burger goes up. it's all downstream of the same phenomenon

the blue line – M2 scaled to the Big Mac's starting price – shows the theoretical ceiling if the burger perfectly tracked monetary expansion. the actual price sits well below M2, which makes sense: not every new dollar enters the food supply chain immediately, and the velocity of money fell from roughly 2.1 to about 1.4 over this period (hitting a low of ~1.1 during COVID), meaning each dollar turned over fewer times. velocity absorbed a large share of the expansion. but the direction is unambiguous – the Big Mac tracked monetary growth far more faithfully than it tracked CPI

the data

sources: Big Mac price from The Economist Big Mac Index (US). ground beef from BLS series APU0000703112. CPI from BLS series CUUR0000SA0. M2 from FRED series M2SL.

the last column – Big Mac indexed to 2000 – lets you compare directly against CPI. by 2024 the Big Mac index reads 254 while CPI reads 182. the Big Mac outran CPI in every period. the gap opened early and never closed

a few complications worth noting briefly: McDonald's operating margin shifted from ~17% to ~40% between 2000 and 2024, but most of that reflects the move to a franchise-heavy model rather than pure price extraction. fast food labor productivity was largely flat until 2019, when kiosks and app ordering drove a genuine jump – so the "productivity should lower the price" argument applies more to the supply chain than to the restaurant floor. these are real nuances, but they don't change the central finding

mcflation

there's a word for what this data describes. people started calling it McFlation – the visible, felt inflation that shows up at the counter of the world's largest fast food chain. McDonald's CEO Chris Kempczinski called it a "battleground" in early 2024. customers were posting $18 Big Mac combo meals on social media. three US senators wrote to McDonald's accusing the chain of raising prices beyond what input costs justified, while simultaneously paying out $4 billion in stock buybacks in 2022 and over $3 billion in 2023. McDonald's president Joe Erlinger responded that average menu prices were up about 40% since 2019 – roughly matching the 40% rise in their food and labor costs

McFlation isn't new economics. it's the same phenomenon the Big Mac Index has been tracking since 1986, when The Economist's Pam Woodall invented it as a semi-humorous illustration of purchasing power parity across countries. the original purpose was currency comparison – is the yen overvalued against the dollar? – but because the index has run for nearly four decades, it accidentally became one of the longest-running single-product inflation trackers in existence

the St. Louis Fed picked up on this in 2024. their research showed that since 2012, the indexed Big Mac price has consistently run above CPI, though the two moved roughly in parallel. the interesting divergence came after January 2021: CPI inflation surged to a peak of 8.5% in July 2022, while Big Mac inflation rose more slowly, reaching only 4.5% at the same point. the Fed's explanation is that "food away from home" is only 5.4% of the CPI basket – so the Big Mac doesn't drive CPI, but it does reveal something CPI can't: the price trajectory of a single unchanging product over time

what this article adds to the McFlation conversation is the longer view. the 2024 backlash focused on the post-COVID spike – prices up 40% in five years. but the 24-year dataset shows that the spike didn't start in 2020. it started decades earlier, running at roughly 4% per year compounded, consistently outpacing the official measure. the COVID-era surge was a step function in an existing trend, not a new trend. consumers noticed McFlation in 2024 because the pace briefly became impossible to ignore. but the gap between what you're paying and what CPI says you should be paying has been widening since at least 2000

the core customer base that left McDonald's in 2024 – households earning under $45,000 who switched to cooking at home – didn't leave because of a sudden price shock. they left because a decades-long erosion of purchasing power finally crossed a threshold. the $5 Meal Deal McDonald's launched in response is a concession to that reality. but a $5 deal in 2024 buys roughly what $2 bought in 2000. that's not a discount – it's the substitution mechanism working in real time, at the menu level

the question this leaves

the standard inflation debate asks whether wages kept up with prices. that framing concedes the baseline – prices rise, the only question is how fast

but if you hold the product fixed, the question changes. a Big Mac should cost roughly what it costs to make a Big Mac. the inputs got more efficient over twenty-four years. supply chains consolidated. logistics improved. the price should have drifted down, or at worst stayed flat

instead it went from $2.24 to $5.69. CPI says that's normal – 82% over 24 years. but the Big Mac says 154%. beef says 231%. M2 says 330%. the official index is the outlier, not the confirmation

you don't need to call CPI fabricated. you just need to notice that a fixed product – same recipe, same ingredients, same burger for almost sixty years – grew nearly twice as fast as what the official measure claims. the substitution mechanism isn't a flaw in CPI. it's working exactly as designed. the question is whether the thing it's designed to measure is the thing you actually want to know

sources: Big Mac price: The Economist Big Mac Index (data). ground beef: BLS series APU0000703112. CPI: BLS series CUUR0000SA0. M2: FRED series M2SL. M2 velocity: FRED series M2V. McDonald's operating margin: SEC 10-K filings. BLS fast food productivity: Monthly Labor Review, 2025. McFlation: Fortune. McDonald's pricing backlash: NBC News. senators' letter: Restaurant Business; NBC News. Erlinger open letter: Yahoo Finance. Big Mac Index and CPI: St. Louis Fed. Big Mac Index history: Wikipedia. $5 Meal Deal: Fortune.