It is my pleasure to join the ICLP Bulletin staff and write a column about economics this quarter.  I will discuss various topics that fall into the economic and financial realm. I am by no means an authority (an undergraduate major in economics and several year’s experience on Wall Street doesn’t make you Jeffrey Sachs), but I will discuss timely and interesting topics related to Taiwan and Asia.  I am one of those folks that genuinely likes economics, the science of supply of demand and allocation of limited resources.  Those unfamiliar with ISM and ADAS curves may feel like economics is up in some unreachable academic stratosphere, but I assure all of you that it is actually something that you think about each and every day, for instance, when you decide to splurge on a hotpot dinner or to attend a noontime ICLP lecture to snatch a free lunch (admit it, we’ve all done it!).

　　First, some food for thought: prices in Taiwan.  Most of us ICLPers come to Taiwan either as students or professionals taking a mid-career break.  Either way, we ain’t making no money while here.  Regardless of financial constraints, we all experience varying degrees of positive sticker shock when we realize that prices here in Taiwan are kind and gentle on our bank accounts.  Very rarely do goods and services cost the same as they do in the United States or Europe, and if they are, it’s because they’re luxury or name brand goods that have inelastic global demand.  We won’t notice any discount when purchasing Bottega Veneta bags, iPods, or Twix bars.  I remember when I first went shopping in Taiwan, I started off overly enthusiastic and found myself with bags and bags of useless trinkets and baubles.  You can spot tourists by the number of shopping bags they tote around at night markets… why?  Not only are many local Taiwanese immune from those bewitching, shiny, sparkly things, many actually can’t afford the things that Westerners deem to be on fire sale.  That seems intuitive, because obviously one of the reasons why goods are priced lower than they are in the States is because of lower wages, but how can we actually gauge the “price of living” in Taiwan?

　　One of the best ways to calibrate true price of living standards is to consider wages versus necessary goods, such as food products.  The minimum monthly wage in Taiwan has remained at 17,280NTD (USD $540) since 2007, which comes out to 95NTD (USD $3) an hour.  The federal minimum wage in the United States is $7.25 USD an hour, with some states and municipalities mandating more than this.  This means that wages in the States are at least 240% of Taiwanese minimum wage.  There are many other factors to think about, such as the wage demographics (size of the middle class, etc.), but for the sake of a simple lifestyle estimation we will assume that 240% is the magic ratio between US and Taiwanese wages.  As an exercise, multiply everything that you purchase by 240% and then divide that by the USD/NTD foreign exchange ratio of ~30 (the actual current exchange rate is 31.65, but no need to cramp our brain here). The number you get is the US-Taiwan calibrated value from the perspective of a minimal wage earning Taiwanese worker.

　　Again: (Price of Goods in NTD x 240%)/30NT = Value in USD

　　Let’s practice on something we are all intimately familiar with: coffee. That 7-11 coffee is 35NT, right? That equals $2.80 USD to us American folks—not so dirt cheap anymore. How about that globally inelastically-priced Starbucks vanilla latte, which costs 110NTD? That’s $8.80 USD.  Would you actually pay $8.80 for Starbucks?  Hell no!  It’s hard why any sensible Taiwan McDonald’s burger-flipping worker would ever shell out 110NTD for a Starbucks drink.

　　So, if you ever invite your Taiwanese local friends out to eat out, remember this rough guideline and you will be able to see things from their economic point of view.  You will also understand why when you pull out your wallet brimming with blue bills, suddenly you’re the most popular guy in the room (it might not be because of your engaging Chinese conversation skills).  It can be a hard knock life, even on Ilha Formosa, the Beautiful Island.