The top four are all in Switzerland and Japan



Reuters



Zurich is the most expensive city in the world, according to the latest Worldwide Cost of Living Survey from the Economist Intelligence Unit, which found the four priciest metros are all in Switzerland and Japan.

The survey compares the price of hundreds of products and services, including food, rent, and transportation, in 131 cities. The prices are then indexed to New York City, which keeps a score of 100. Zurich knocked off Tokyo by a score of 170 to 166, which indicates that living in those cities is 70% and 66% more expensive than living in NYC, as measured in U.S. dollars. No American cities cracked the top 10. (If you find it hard to believe that so many cities in the world are more expensive than every U.S. metro, keep in mind that real estate prices aren't factored into the survey.)



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Looking deeper down the list, some surprises emerge. New York City fell below Los Angeles into a tie with Chicago. Globetrotters might be surprised to learn that Cleveland finished just above Rio. The three cities at the bottom of the list were Karachi, Pakistan, Mumbai, and Tehran, all of which finished around 50, suggesting that they are half as expensive as New York City. This great graph from The Economist offers a good sampling of large metros:



The data is fascinating enough, in a trivial sense. But it begs the question: What makes a city expensive, anyway? As a general rule, prices are higher in richer countries. This seems so obvious, one's tempted to stop there. But the reasons are interesting to pick though.



It begins with trade. You can think of an economy as making two kinds of stuff. There's the stuff you can put in boxes and trade, like auto parts, and the stuff you can't put in boxes or trade, like hair cuts. If a country gets good at making stuff it can trade for money, it becomes richer. As export income and investment flows in, incomes rise, wages rise, and prices rise across the board. Even the prices for the (utterly non-boxable) haircuts.