Monday, August 31, 2009

Affordability Index

Back in 1995, the two basic ideas that led me to follow the economic theory that later came to be called Hyperwage Theory. First, it is non-linear relationship between wage levels and price levels. Meaning, doubling wages does not automatically result in doubling of prices. Second, the previous concept of comparing prices across nations was defective. The popular one was the Big Mac index by The Economist magazine. Hyperwage Theory was first discussed discussed on ABS-CBN radio in 2005 for two consecutive days in Leo Lastimosa's Arangkada program, and subsequently published in 2005 in BusinessWorld for 33 weeks. After it was published, the Hyperwage Theor e-book was distributed to tens of thousands via email, to Europe, Africa, Asia and North America practically all regions. The thousands who forwarded the e-book to all in their address books helped propagate the idea of Hyperwage Theory. What I came to call as Bentulan Affordability Index, for lack of a better term to identify it, during my forums on Hyperwage Theory has not been done before as basis of comparison. The said affordability index was published in 2005. The Big Mac index was not adequate enough to explain why the so-called cheap countries are poor. I contacted Penn World Tables who did not have any such index as the Bentulan Affordability Index. In my Hyperwage Book, I refuted the value of the World Bank's Purchasing Power Parity. So I made my own,and these tables are found in the Hyperwage book in 2005. The ebook was sent to all contacts and theirs, including banks, economic institutions, and many others worldwide. In 2006, one year later, UBS camed out with a revised report this time showing the Bentulan Affordability Index (labor-hours, or labor-minutes) to compare the cost of living worldwide. This month, UBS came out with their 2009 update. I am glad, finally, the never before mentioned index has been adopted into the mainstream economics. The Nobel Prize should be around the corner.