8 Strange Economic Indices

8 Strange Economic Indices
See Gallery
8 Strange Economic Indices

By Bruce Watson, DailyFinance

Proposed by economist Michael McDonough, the trash index notes the relationship between a society's GDP and the trash that it produces. As people buy more goods, they produce more jobs -- and more garbage. When trash production goes down, McDonough argues, its a sign that the economy may be doing poorly

Originally proposed in 2001 by Estee Lauder chairman Leonard Lauder, the Lipstick Index holds that lipstick sales go up when the economy is in trouble. Supposedly, women use relatively inexpensive purchases like cosmetics as a substitute for more expensive purchases like clothing or shoes. But, as later evidence has shown, lipstick manufacturers tend to stay in the black, regardless of whether or not the economy is in the red.

This famous index -- closely followed by former Fed Chairman Alan Greenspan -- argues that men tend to hold off on buying underwear when the economy gets skittish. On the flip side, the theory suggests, an increase in men's underwear sales suggest that a recovery is just around the corner.

When you're trying to understand another country's economy, what could be a better measure than McDonald's? The Big Mac Index, proposed in the mid-1980s, looks at how many hours the average worker needs to work in order to buy afford one of America's favorite burgers.

Proposed in 1926, the Hemline Index argues that, as the economy gets better, skirts get shorter. Lengthening skirts, on the other hand, suggest that the economy is on a downward slide. Unlike many other offbeat indices, the Hemline Index has been a largely accurate indicator over its long history.

According to this theory, by the time a news story makes its way to the cover of a business magazine, it is officially out of date. In other words, if the cover of Fortune claims that Apple is in trouble, a savvy investor will buy Apple stock, as a recovery is likely around the corner. History has often proved this theory wrong. To make matters worse, the slow death of magazines suggests that, within a few short years, this index will be little more than a historical footnote.

According to this 1999 theory, new "world's tallest buildings" tend to be erected on the eve of economic downturns. While there is some historical evidence to back up this theory -- for example, ground was broken on the Empire State building in 1929 -- it is often incorrect.