Coffee index

I’ve long believed that a cup of coffee provides a good cost of living index. It’s a ubiquitous product, almost a staple, highly available, and a commodity. (The McDonald’s theory is flawed, because they maintain their U.S.-derived pricing in many third world countries—for example, in La Paz Bolivia a burger is unreasonably expensive).

Anyhow, the interesting thing is that calculating a cost of living index based on a cup of coffee gives me 0.00024 (U.S.) to 0.0005 (Iceland). The same approach on a typical, moderate lunch derives 0.00104 (U.S.) to 0.00289 (Iceland). The trendline there is, obviously, about a double cost of living, at least on basic commodities. That, however, is the limitation because basic commodities do not make an entire cost of living index. The only way to really do a thorough job is to build a spreadsheet that takes everything into effect, from healthcare (essentially free in Iceland and expensive in the U.S.) to housing (more or less similar between Reykjavik and, say, San Francisco), utilities (essentially free in Iceland) and commodities.

I didn’t go into excruciating depth on my analysis, but more in-depth research actually disproved my coffee index, at least to a point. After comparing housing, utilities, commodities, education, taxes, healthcare and half a dozen other factors I’ve decided that Reykjavik, Iceland, like much of Europe, is hovering right around a cost of living index of 150% relative to Los Angeles. But don’t forget to factor in the long-term benefits of not having pay for health care, having great education available at very small cost and more vacation time for a family-focused lifestyle. Hard dollars are one thing, but the intangibles are much harder to measure.