Misery index (economics)
The misery index is an economic indicator, created by economist Arthur Okun, and found by adding the unemployment rate to the inflation rate. It is assumed that both a higher rate of unemployment and a worsening of inflation create economic and social costs for a country.[1]
A 2001 paper looking at large-scale surveys in Europe and the United States concluded that the basic misery index underweights the unhappiness caused by joblessness: "the estimates suggest that people would trade off a 1-percentage-point increase in the unemployment rate for a 1.7-percentage-point increase in the inflation rate."[2]
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[edit] Misery index - era by U.S president
| President | Time Period | Average | Low | High | Start | End | Change |
|---|---|---|---|---|---|---|---|
| Harry Truman | 1948–1952 | 7.88 | 3.45 – Dec 1952 | 13.63 – Jan 1948 | 13.63 | 3.45 | -10.18 |
| Dwight D. Eisenhower | 1953–1960 | 6.26 | 2.97 – Jul 1953 | 10.98 – Apr 1958 | 3.28 | 7.96 | +4.68 |
| John F. Kennedy | 1961–1962 | 7.14 | 6.40 – Jul 1962 | 8.38 – Jul 1961 | 8.31 | 6.82 | -1.49 |
| Lyndon B. Johnson | 1963–1968 | 6.77 | 5.70 – Nov 1965 | 8.19 – Jul 1968 | 7.02 | 8.12 | +1.10 |
| Richard Nixon | 1969–1973 | 10.57 | 7.80 – Jan 1969 | 17.01 – Jul 1974 | 7.80 | 17.01 | +9.21 |
| Gerald Ford | 1974–1976 | 16.00 | 12.66 – Dec 1976 | 19.90 – Jan 1975 | 16.36 | 12.66 | -3.70 |
| Jimmy Carter | 1977–1980 | 16.26 | 12.60 – Apr 1978 | 21.98 – Jun 1980 | 12.72 | 19.72 | +7.00 |
| Ronald Reagan | 1981–1988 | 12.19 | 7.70 – Dec 1986 | 19.33 – Jan 1981 | 19.33 | 9.72 | -9.61 |
| George H. W. Bush | 1989–1992 | 10.68 | 9.64 – Sep 1989 | 12.47 – Nov 1990 | 10.07 | 10.30 | +0.23 |
| Bill Clinton | 1993–2000 | 7.80 | 5.74 – Apr 1998 | 10.56 – Jan 1993 | 10.56 | 7.29 | -3.27 |
| George W. Bush | 2001–2008 | 8.11 | 5.71 – Oct 2006 | 11.47 – Aug 2008 | 7.93 | 7.49 | -0.44 |
| Barack Obama | 2009–Present Incomplete data Data updated through November 2011 |
10.75 | 7.30 – July 2009 index offset by negative inflation (-2.10) |
12.97 – September 2011 | 7.73 | 11.99 | +4.26 |
[edit] Misery and crime
Some economists posit that the components of the Misery Index drive the crime rate to a degree. Using data from 1960 to 2005, they have found that the Misery Index and the crime rate correlate strongly and that the Misery Index seems to lead the crime rate by a year or so.[4] In fact, the correlation is so strong that the two can be said to be cointegrated, and stronger than correlation with either the unemployment rate or inflation rate alone
[edit] Data sources
The data for the misery index is obtained from unemployment data published by the U.S. Department of Labor and the Inflation Rate from Financial Trend Forecaster. The exact methods used for measuring unemployment and inflation have changed over time, although past data is usually normalized so that past and future metrics are comparable.
[edit] Related indexes
The Despondency Index, developed by the Bureau of Inverse Technology, correlates, in real time, the suicide rate measured with the Suicide Box at the Golden Gate Bridge, to the Dow Jones Industrial Average.
[edit] References
- ^ The US Misery Index
- ^ Di Tella, Rafael; MacCulloch, Robert J. and Oswald, Andrew (2001), "Preferences over Inflation and Unemployment: Evidence from Surveys of Happiness", American Economic Review, 91(1), pp335-341. p340
- ^ "US Misery Index by President". http://www.miseryindex.us/indexbypresident.asp.
- ^ http://ideas.repec.org/a/eee/ecolet/v102y2009i2p112-115.html New evidence from the misery index in the crime function, Tang, Chor Foon Lean, Hooi Hooi
