Frogflation

The year is 2007. In Fife, Scotland, teacher Sharon Iddir has just finished an exhausting day in the classroom - and she is longing for something to eat. With an hour's pay in her pocket, or £14.60, she could buy herself as many as 146 Freddo bars from the supermarket on the road to the school. It is a tempting thought - after all, the tiny 10p chocolate frogs are delicious.

Today, Sharon Iddir is still a teacher in Scotland. Her pay has gone up, so she now has £20.50 in her pocket when she walks into the supermarket. But the price of Freddos has risen even more. When she reaches the checkout till, she can only afford 82 Freddo bars. It is a real-term pay cut of 64 Freddos per hour.

This is the Freddo Index, and it was used by Iddir to explain to people across Britain why she decided to join other teachers and go on strikeWhen people refuse to work until their demands for changes have been met. .

Most people are familiar with the concept of inflationAn increase in the price of goods in an economy. . Economists measure it using the retail price indexA measure of inflation published monthly in the UK. or the consumer price indexA measure in inflation, tracking how much a basket of goods would cost you over time. . But some say we need a new way to show how inflation impacts people's lives - and the humble chocolate frog is the perfect example. Forget the RPI or the CPI. It is all about the Freddo Index.

The Freddo bar started life in the 1930s but was relaunched in the 1990s at the price of 10p.¹ Had the price of Freddos stayed in line with the average rate of inflation in Britain, Freddos would today be priced at around 15p. Yet the most common price for the anthropomorphic chocolate frog currently stands at 25p - a staggering 150% increase. 

Sharon Iddir is not alone in reaching for the Freddo Index. Across the UK, nurses, teachers and university lecturers have all gone on strike this year. So have railway workers, firefighters, journalists, civil servantsAnyone working in a government department. The civil service has long-standing traditions and strict codes of conduct that can make it a law unto itself., doctors and ambulance drivers. All of them are citing a "real-terms pay cut" as the reason. 

A nurse's starting salary has fallen in real terms by 8% since 2010. Experienced teachers will have seen a 13% real-terms drop. This may all seem rather abstract, but the Freddo Index makes it clear.

It is not the first time that food has been used for such purposes. The Big Mac Index is a way to compare the cost of living by comparing the price of a hamburger in different countries. The idea is that if a Big Mac costs the same in two countries, then the cost of living in those countries is also the same. It is not a perfect way to compare the cost of living, say economists, but instead it is a simple and easy-to-understand way to get a general idea.

Yet critics point out that these methods are far from accurate. Official calculations of inflation look at the values of average shopping baskets using hundreds of items - not just Big Macs or sweets. 

Simple exercises like these are brilliant at distilling abstract concepts but they cannot substitute for years of work on complex problems. 

Piero Sraffa was an Italian economist who spent decades working on the subject of inflation. During that time he survived two world wars, persecution for his work and received two threatening telegrams from the fascistFollowing fascism, a set of ideologies that advocates dictatorial power, political violence, suppression of opposition, traditional gender roles, and official racism. dictator MussoliniThe fascist dictator of Italy from 1925 to 1945. himself - all with the aim of contributing to economic theory. It is impossible to say what he would have thought of the Freddo Index.

Yes: Changes in the price of the Freddo bar reflect broader changes in prices across the economy, as suppliers adjust prices in response to increased costs of production or changes in demand. It explains real-term pay cuts in a way no other index does.

No: The Freddo Index is limited in its ability to fully explain inflation, as it only represents the price of one specific good. Moreover, inflation is a complex phenomenon influenced by multiple factors.

Or... The "Freddo Index" is a playful concept. It is not a formal economic measure but it helps us to understand a complex idea in a simple way. The same idea can then be applied to other products helping us gain an overall understanding.