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The Coffee Test: A New Measure of Economic Efficiency

The Coffee Test: A New Measure of Economic Efficiency

 

June 21, 2024

 

You may have heard of the Big Mac Index, a quirky yet insightful measure comparing the price of a Big Mac in various cities worldwide. This index provides:

  • A snapshot of the purchasing power of citizens.

  • The cost of living.

  • The relative value of currencies against the dollar.

 

Similarly, a Starbucks Index, also known as the Coffee Index, operates on a similar principle using the price of a cup of coffee.

However, I propose something slightly different and more personal: the Coffee Test. Unlike these indices, which focus on the cost alone, the Coffee Test considers the price and the entire experience of buying a cup of black coffee. This simple, universal transaction can reveal much about an economy's efficiency and the quality of service provided.

The Coffee Experience in Curaçao

In Curaçao, for instance, purchasing a cup of coffee only at McDonald's costs less than 5 guilders, roughly equivalent to about 3 euros—the typical price you would expect in Europe. In other places, it is above 5 guilders. However, it gets interesting here: despite the comparable price, the experience is markedly different.

First, there is the issue of speed. In Europe, the US, or Latin America, you might expect your coffee almost immediately. In Curaçao, the service is notably slower. You have to wait longer for your coffee, and the transaction process—explaining your order and paying for it—is similarly sluggish. This is not just a minor inconvenience but a telling indicator of underlying inefficiencies.

 

What the Coffee Test Tells Us?

So, what does this slower, more cumbersome coffee-buying experience tell us? Several things:

  1. Efficiency: The slow service reflects broader inefficiencies within the local economy. If something as straightforward as buying coffee is slow, other areas of business and daily life may also suffer from inefficiency.

  2. Cost vs. Service Quality: Despite paying a price comparable to Europe's, the service quality in Curaçao does not match. This indicates that consumers are getting less value for their money, which can deter locals and tourists.

  3. Competitive Disadvantage: In a globalized world, where people are accustomed to quick and efficient service, this inefficiency could hurt Curaçao's competitiveness. Tourists and business travelers might prefer destinations where they can expect faster and more reliable service.

 

Why the Coffee Test Matters?

The Coffee Test goes beyond just comparing prices; it encapsulates the entire customer experience, providing a more holistic view of economic and service efficiency. In a competitive global market, the speed and quality of service are crucial. Countries and cities that lag in these areas may be disadvantaged, losing out on tourism, business opportunities, and even local consumer satisfaction.

In conclusion, while the Big Mac and Coffee Index provide valuable insights into cost and currency value, the Coffee Test offers a deeper understanding of everyday economic efficiency. By considering what we pay, how we pay, and the service we receive, we can gain a fuller picture of an economy's health and competitiveness. In Curaçao, the Coffee Test reveals a need for greater efficiency and better service quality—essential factors for thriving in today's fast-paced world.


Miguel Goede

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