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The Big Mac index suggests differences between Europe and North America on a key benchmark should have been wider

Each year the Economist uses the cost of a Big Mac in various countries to compare the official exchange rate to that cost. The magazine uses a standard Big Mac in the US ($3.73) as the index and ranks countries according to whether the same order costs above or below that amount. If the price is above, the currency is deemed over-valued by the calculated percentage. For example, what someone pays in Euros for the ubiquitous hamburger is equivalent to $4.33, so the Euro is overvalued by 16 percent. By the same methodology Asian currencies are generally undervalued. All this is laid out in the Economist, July 24, 2010, at 72.

To the extent the Euro is overvalued, law departments that convert their 2009 spend and revenue into dollars for benchmark purposes over-state those figures (See my post of July 7, 2010: regional gap on total legal spend as a percentage of revenue.). Spending metrics that use revenue as a denominator to internal or external spending will not be affected by the imputed conversion rate (since the numerator and denominator are equally affected), but metrics like internal spend per lawyer in US dollars will look higher if the currency is over-valued.

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