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Sunday, November 25, 2007

The Sunday Mailbag: Pricing Thanksgiving

Letters, we get letters, we get lots of cards and letters every day

Dear La Russophobe:

Thursday was our holiday of Thanksgiving. One of the things I'm thankful for is the privilege of knowing and working with all of you. Since the fall of the USSR the world has become much smaller and American and Russian interaction has led to some unusual phenomena. One of them was described in a recent article in the Moscow Times, namely that some Moscow restaurants are now serving a traditional Thanksgiving dinner. Out of idle curiosity I converted the prices to dollars and compared them with what is be offered at similar restaurants in San Francisco.

HEMINGWAY'S (Moscow): $57
THE CLIFF HOUSE (Frisco): $42

THE APARTMENT (Moscow): $102
MAX'S OPERA CAFE (Frisco): $52

MEL'S DRIVE-IN (Frisco): $11

When the Politburo announced that Russia would catch up with and overtake America economically, I don't think this is what they had in mind.

Sincerely yours,


La Russophobe responds: It would seem that this is pretty impressive evidence that "purchasing power parity" is not only gibberish, but should be used to expand the already vast difference in purchasing power between Americans and Russians, rather than contracting it. And that doesn't take into consideration Russia's wretched quality control system, meaning that any number of the food products you are served in its restaurants, including the water (if you dare to drink it) may be contaminated with all manner of pollutants, including radioactive toxins from the Chelyabinsk and Chernobyl areas.


Anonymous said...

A Big Mac costs:

1.85$ in Russia
3.22$ in the US

Most of the people buying a Thanksgiving dinner in Moscow will probably be Americans anyway.

La Russophobe said...

Interesting. Based on what we've been told by Russians, we've always thought that the Big Mac Index was totally bogus where Russia is concerned, because most Russians hate cheeseburgers and wouldn't be caught dead eating them, so the Index was non-representative where Russia is concerned. So thanks for correcting us! Russians love American cheeseburgers! Who knew!

There are a couple of flaws in your "thinking" process:

(1) If one can purchase a Big Mac in Russia for $1.85, then what type of slave wages are being paid to the Russians who sell them? Did that question ever occur to you?

(2) You may have missed it, but it was pretty big news. In the most recent survey, Moscow was named the world's MOST EXPENSIVE CITY.

That was the letter-writer's point, and it's really disgusting of you to fail to at least TRY to pay attention to it before responding with your goofy knee-jerk propaganda.

The point is that while Moscow is the world's most expensive city, it's wage structure is not even remotely comparable to that of major Western cities, meaning that, just as in Tsarist and Soviet times, ordinary Russians are easily priced out of its benefits.

(3) Your implication that it's fine to gouge Americans (or all foreign tourists) is typically barbaric Russian idiocy.

Moscow, where the vast majority of Russia's McDonald's restaurants are located

Anonymous said...

"(1) If one can purchase a Big Mac in Russia for $1.85, then what type of slave wages are being paid to the Russians who sell them? Did that question ever occur to you?"

1. You claim a Russian's nominal wage is lower than an American's. Correct.
2. You claim that the purchasing power of a Russian wage is even lower than it's nominal value as % of American, because things are more expensive in Russia. Incorrect.
3. The Big Mac index is just a simple illustration of the concept; in reality the GDP deflator is worked out using a basket of goods. At the largest level, Russia's 2006 purchasing power GDP was about 1.8trn$ against 1.0trn$ at market exchange rates (World Bank, IMF, etc stats). This suggests that overall the GDP deflator as given by the Big Mac index is quite accurate.
4. Not only is your objection irrelevant to your 'argument', it is purely rhetorical. It's your job to research what a McDonald's wage in Russia is.
5. Being very kind I did it for your to satisfy my own curiosity. For young beginners with no higher education it's around 10000RU / month, which currently translates to 400$ - a very typical Moscow wage for unqualified people.

"(2) You may have missed it, but it was pretty big news. In the most recent survey, Moscow was named the world's MOST EXPENSIVE CITY."

For expats who consume luxury hotels and oysters with champagne, it is. For average Joe (or show I say Ivan) it mostly certainly isn't.

"(3) Your implication that it's fine to gouge Americans (or all foreign tourists) is typically barbaric Russian idiocy."

I presume the Thanksgiving restaurants are private (like the vast majority of the catering industry) and subject to market forces. Thus I cannot in principle make such an implication even if I really wanted to for some reason.

Anyway this is totally illogical. Russian food that is sold in the West, for instance, is much more expensive than in Russia, even taking the GDP deflator into account.

"Moscow, where the vast majority of Russia's McDonald's restaurants are located"

While that was the case in 1997, it is not the case in 2007.


Don't construe this is an attack. I respect this publication. It is very amusing and I experience spasms of masochistic delight whenever Russia is insulted and denigrated, so I'd like to convey my appreciation.

La Russophobe said...

Big Mac isn't an illustration, it's a ludicrous red herring from a pathetic Russophile propagandist who totally ignores all the relevant facts and responds in a knee-jerk neo-Soviet manner to defend Russia blindly, in the same way the Soviets did, the same manner that lead to their pathetic downfall.

McDonald's restaurants are not pervasive in Russia, they're only widely present in a few big cities. The "most expensive city" list clearly refutes any relevance the Big Mac Index might have in Moscow, which is Russia's most prosperous region and the one where McDonald's has wide presence. Your discussion of Big Macs is simply misleading, that's all there is to it. It sounds like propaganda, no matter how you intended it, so that's how we'll treat it. There is nothing in your original comment recognizing the validity of the point the letter writer was making.

The deflator calculation is totally bogus, since it does not consider the quality of the goods at issue AT ALL. A liter of milk in the US and Russia is viewed as being the same even though statistics show that Russians live decades shorter lives than Americans, in part because their food products are contaminated by all manner of toxic pollutants, including radiation. An hour of medical care is viewed as being the same even though American doctors study twice as long and Americans live decades longer. Pure garbage. And it's obviously even more totally irrelevant in Moscow, the world's most expensive city.

Why do you fail to calculate that $400 per month translates to an hourly wage of $2.50 per hour for full time work, in the world's most expensive city? Is it because you're a lying propagandist piece of filth? That's third-world living standards in Russia's capital! You're actually making the case you're "arguing" against.

You can blab your propaganda all you like, but the world will only laugh at you. Cut off from all sources of real information, consumed by a frenzy of hatred and nationalism, you and your ilk lead Russia into the neo-Soviet abyss. You are far more dangerous to Russia than any foreign "enemy" could dream of being.

misha said...

When a city becomes expensive it is a sign of a booming economy. Land prices have gone up in Moscow because developers can't construct new apartments, hotels and offices fast enough. Moscow is filled with millionaire businessmen from all over the world in town for deals. If you want to get a hotel room they are your competition, and they are probably able to outbid you in the marketplace. That's the law of supply and demand. Prices are high because demand is high, and the people in Moscow can (obviously) afford to pay it. Moscow is not a city I'd want to live in making minimum wage. But then I wouldn't want to live in London or Manhattan either, unless I could afford the cost of life there.

The comparison of the cost of a Thanksgiving turkey dinner in a Moscow restaurant vs. a US restaurant is about as misleading as you can get. First of all, Moscow is the most expensive city in Russia and one of the most expensive anywhere, for reasons I already mentioned (mainly lots and lots of money rattling around in Moscow).

If 100 people want to eat Thanksgiving dinner is a Moscow restaurant but there's only 10 spaces, then who decides which 10 percent of the people will get a space? Well, if the restaurant is capitalist it will raise the price, and keep raising it, until demand falls to 90, 80, 70, 60.... all the way to 10. Those 10 willing to pay the highest price will get a seat, and the other 90 will have to find somewhere else to eat. But in a city like Moscow, you are competing for space with millionaires for whom money is basically no object.

If a Russian tycoon wants to impress his mistress by treating her to a genuine USA Thanksgiving Diner, then do you really think the average working stiff "Joe American" is going to be able to outbid our Russian billionaire for space at the table? I think not.

Anyway, a traditional American Thanksgiving dinner consisting of Turkey with all the fixings is hardly a "normal dinner" in Russia. It is obvious a luxury that is provided for the sake of foreigners (in this case Americans) who are in town. So you are comparing something that is an unusual and special luxury (in Moscow) that is only provided in small amounts, mainly for rich foreigners, with something that is basically just a commodity in the USA.

I'm sure Moscow's many restaurants also provide special cuisine tuned to other foreign tastes, such as Japanese tastes... for a price. But again, that's hardly the "standard meal" in Russia, and using such a price for a general comparison of prices between Japan and Russia would be meaningless.

How much is a traditional American Thanksgiving turkey dinner in Tokyo for example, or London? What relevance does the answer have on any general price comparison between these two countries? None basically.

Certainly something like a "Big Mac" fits the bill as a "basic commodity" much more than the cost of a Turkey Dinner in Moscow.

I've seen many Russian restaurants with American themes. For example they might copy a 50's drive-in diner. The restaurant designers will carefully research what an American 50's drive-in diner looked like, and then they will try to copy everything, down to the most minute detail.

Now take something like this minutely copied Russian diner and plant it in the heart of Moscow (one of the most expensive cities in the world), and market it primarily to the rich foreigners in town, and I will guaranty that the prices are going to be very high, and much higher than prices at some drive-thru in Peoria.

Then to compare the price of a cheeseburger in this Moscow restaurant with the price of a cheeseburger in some American drive-thru would be an absurd method of doing "price comparisons". The two things being compared are not the same at all, even if the weight and composition of the cheeseburger is identical in both cases.

The cheeseburger on offer in an American drive-thru can fairly be described as an American "commodity" while the same "cheeseburger" on offer in a specially designed Moscow boutique restaurant, marketed to a niche market of foreigners, is not a Russian "commodity" at all, but a specialty niche-market good, and it costs the restaurant owners much more to provide the 50's drive-thru experience in downtown Moscow than it does in the US.

A given good (commodity) can be identical to another good (commodity) from a technical standpoint, but still be different from an economic standpoint.

A good example of this would be a a bag of popcorn. What is the price of a bag of popcorn in the USA? The answer is "it depends"... If you want to get that bag of popcorn at a ball game or in a movie theater, it might cost 10 times more than it would cost to buy it on the street. From the technical standpoint, any bag of popcorn is equal to any other bag of popcorn, but from an economic standpoint, not all bags are equal.

It's foolish to think that the economic value of a good is somehow dependent on the technical qualities of that good. The same two goods can be identical technically but completely different economically.

We can argue all day about what prices should be included in any comparison between two countries. But no one would disagree that the costs of basic commodities such as food, housing, clothing, etc, is far more meaningful than comparing boutique luxury items in one country with basic commodities in another country.

So to say an American Thanksgiving dinner is an American Thanksgiving dinner, and they are "all the same" regardless of whether one buys the dinner in San Fransisco, Moscow, Africa or the North Pole is ridiculous and only shows muddle-minded thinking. Any two Thanksgiving dinners might be identical technically, if they both contain the same amount of protein, the gravy is made the same way, etc. But two Thanksgiving Turkey dinners served under completely different circumstances, at opposite ends of the world, will never be identical goods economically.

A Russian living in the US might develop a strong craving for some food or other good from the Motherland. Such a thing might not be available in the US at all, at any price. Or, some enterprising American might be willing to provide this good to our Russian friend... if the price is high enough. But the same thing might cost a lot more in the US than it costs back home in Russia. While this is a "basic commodity" in Russia, it is a high-value "boutique" good in the USA. Such goods are obviously not good candidates for doing "general price comparisons" between the US and Russia.

Economists use very detailed methods for collecting and comparing price data between nations. They use this data to adjust nominal GDP figures for comparison between countries. This method is well established and accepted by all economists. For you to speak about something that you obviously know nothing about only shows ignorance.

Economists are forced to work with average prices. Anyone can come up with some exception to these average prices, and mention some good that is ultra expensive, such as traditional Russian borscht served in downtown Chicago at the top of the Sears Tower, or an American thanksgiving Turkey dinner served in Moscow, but such anecdotal observations are not relevant when comparing general price levels between the two countries.

The "average" takes everything into consideration. It does not ignore the high prices in Moscow, but it only blends those high prices into the overall average for all Russia. (Prices are higher in Moscow, but most Russians don't live in Moscow so it doesn't matter for them, anymore than New York City prices matter to someone living in Illinois.)

At the end of the day, the average price for most things in Russia is significantly cheaper then for the same commodities in the USA. This is true even when you blend the high prices in go-go Moscow into the overall Russian average. This leads to an adjustment in Russia's favor when calculating GDP by the Purchasing Power Parity (PPP) method accepted by economists.

If the overall (average) prices in Russia were higher than in the USA, then economists would be happy to calculate Russia's GDP at a lower rate. Economist have no "political" ax to grind when performing such calculations, but they are bound to use the same methods when doing the same comparisons. This is a scientific discipline, and not motivated by polemics. For you to attack economists in this regard is basically tantamount to trying to claim the world is really flat.

When discussion shifts to something that one knows nothing about, then one does best to keeps one's mouth shut, lest one be thought a fool.

La Russophobe said...


When a city becomes expensive but wages do not rise proportionally, it's a sign of an oligarchy. The same oligarchy that, in less than a century, destroyed both the Tsarist and the Bolshevik regimes.

Moscow has by far the largest disparity between personal incomes and cost of living of any major city on the planet. The American standard of living is immeasurably higher than the Russian, right down to the length of people's lives, and the letter writer points out that things are only getting worse while Russians, in a pathetic state of denial just as in Soviet times, imagine the opposite.

You can run, but you can't hide from these basic facts. Your need to spew forth your gibberish at such length shows how powerfully this posts hits, and you can't handle it.

You'll simply never learn. It's really quite sad. We pity you.

"When discussion shifts to something that one knows nothing about, then one does best to keeps one's mouth shut, lest one be thought a fool."

Good advice. Too bad you can't follow it yourself as you embarrass yourself every time you open your mouth. It's amazing how easy it is for you to convince yourself that you, who do nothing more than comment on our posts, are cleverer and more significant than we are. Tell you what -- how about if you make a blog and tell the world all about your brilliance, and let's see if anyone pays attention.

Not interested? Didn't think so.

misha said...

"It's amazing how easy it is for you to convince yourself that you, who do nothing more than comment on our posts, are cleverer and more significant than we are. Tell you what -- how about if you make a blog and tell the world all about your brilliance, and let's see if anyone pays attention."

I comment on "your" posts?.. I think not, for you have no posts that are "yours", in this blog, or at least I could put all of them which are "yours" into a thimble.

As far as I know I have not commented on any of "your" posts, but only the posts which you daily copy and paste into your blog, which are in truth written by other authors, those who actually know how to write, certainly not you!

There are really only two types of people in the world, those that live in the world, embrace it and think and do, and those who criticize the world and philosophize about it, and do nothing, because they think they are too good for it.

I am firmly in the former category, and the idea that I have nothing better to do than gaze starry-eyed into a PC monitor 24/7 to read your nonsense (or the nonsense that you only manage to copy and past, to tell the truth) is absurd!

I could set up 100 blogs, such as yours, and populate each one with 100 times more words than you are apparently able to garnish in this your single blog. But I've other things to do.

I am a busy person, with a busy schedule, and not just living a "virtual" life, in the Internet, 24/7 as you apparently do. (I actually have a "real" life.)

But even so, I will STILL challenge anyone to compare the number of original words which you have written in this--your own blog--with the number I have written here. I am not speaking of what you've copied and pasted here, but what you've actually said, from your own mind, your own heart. You haven't said anything, because you have no voice, no heart and no brain!

What you do have is only hate, and you won't even lend your own words to that hate, but you let others do the talking for you.

In truth all you do is scan the web for some posts (any posts) which might make Russia or the Russian people look bad, and they you copy and paste them word-for-word, verbatim into your blog. That is very lazy. You contribute essentially nothing of original value to your very own blog.

When challenged all you can do is shoot back with personal insults against people who you do not know and who are clearly your intellectual, moral and political superiors.

does that pretty much hit the nail squarely on its head? I think so.

misha said...

"The American standard of living is immeasurably higher than the Russian, right down to the length of people's lives"

Russian lifespans are shorter because the incidence of smoking and drinking are much higher in Russia. Russian's like to live and enjoy life.

Why is it "better" to live a long and miserable live then to live a shorter and happier life? This is a religious-philosophical question, and it is one you have no right to answer for anyone, other than for yourself.

I don't know many 100 year olds that could be described at "happy". Why do we think humans should last longer than their backs, their knees, their hips, their teeth and every other natural component of their lives?

All humans have but one end, and it is unavoidable. Whether you take the "high road" or the "low road" you will still wind up in the same place, the grave!

By the way, the average American is 15% over his ideal body weight by the age of 30, and almost 40% over his ideal weight by the age of 40. When we speak about the US, we are truly speaking of "Fat Nation", a nation of diabetic, coronary, lard-assed cattle. And what's so "healthy" about being nation of big fat pigs? Why don't American's go on a diet for God's sake?

The American lard disease is not only a disease of "old age" but the fastest growing category in the US is for their obese and diabetic children.

Americans could perhaps be redeemed if they were only physical wrecks alone, but with intact brains. But of course the average level of intelligence in the USA is about 1 or 2 points above mental retardation. In a recent study, fully 40 percent of adult American "high" school graduates could not find Australia on a map. Australia for fuck's sake! It is a continent!

La Russophobe said...


Sorry we were confused. If you don't comment on our posts then obviously we shouldn't be publishing your comments. Hence, they will no longer appear on our blog.