Misery index (economics)

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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]

Misery index - era by U.S president[edit]

Index = Unemployment rate + Inflation rate
President Time Period Average Low High Start End Change
Harry Truman 1948–1952 7.88 03.45 – Dec 1952 13.63 – Jan 1948 13.63 3.45 -10.18
Dwight D. Eisenhower 1953–1960 9.26 02.97 – Jul 1953 10.98 – Apr 1958 3.28 9.96 +4.68
John F. Kennedy 1961–1962 7.14 06.40 – Jul 1962 08.38 – Jul 1961 8.31 6.82 -1.49
Lyndon B. Johnson 1963–1968 6.77 05.70 – Nov 1965 08.19 – Jul 1968 7.02 8.12 +1.10
Richard Nixon 1969–1974 10.57 07.80 – 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 07.70 – Dec 1986 19.33 – Jan 1981 19.33 9.72 -9.61
George H. W. Bush 1989–1992 10.68 09.64 – Sep 1989 14.47 – Nov 1990 10.07 10.30 +0.23
Bill Clinton 1993–2000 7.80 05.74 – Apr 1998 10.56 – Jan 1993 10.56 7.29 -3.27
George W. Bush 2001–2008 8.11 05.71 – Oct 2006 11.47 – Aug 2008 7.93 7.39 -0.54
Barack Obama 2009–Dec 2013
Incomplete data
10.26 07.30 – July 2009
index offset by negative inflation (-2.10)
12.97 – September 2011 7.83 8.20 +0.37


Variations on the Misery Index[edit]

Harvard Economist Robert Barro created what he dubbed the “Barro Misery Index” (BMI), in 1999. [3] The BMI takes the sum of the inflation and unemployment rates, and adds to that the interest rate, plus (minus) the shortfall (surplus) between the actual and trend rate of GDP growth.

In the late 2000s, Johns Hopkins economist Steve Hanke built upon Barro’s misery index and began applying it to countries beyond the United States. His modified misery index is the sum of the interest, inflation, and unemployment rates, minus the year-over-year percent change in per-capita GDP growth. [4]

His Misery Index calculations for the Middle East and North Africa indicated that countries in the region generally suffered from prolonged, high levels of economic misery -- with little improvement in the years leading up to the Arab Spring uprisings. Hanke also noted that, in under a month, the Misery Index score for Iran more than doubled, with the onset of hyperinflation in September 2012. [5] To calculate Iran’s misery index score, Hanke calculated an implied monthly inflation rate, using black-market data on the Iranian Rial to U.S. Dollar exchange rate. [6]

In order to illustrate just how dramatically Bulgaria's currency board system improved life for Bulgarians, Hanke also constructed a Misery Index for Bulgaria during the 1995-98 time period. Using this misery index, Hanke demonstrates how Bulgaria's hyperinflation crisis came to an abrupt halt and the level of misery plummeted. [7]

In Mike Maloney's Hidden Secrets of Money bonus features for Episode 1, Bonus Feature 1, Dave Morgan suggests that if you multiply the unemployment rate times two and add it to the inflation rate, you will get chaos when the sum of the two quantities is greater 50.

Political economists Jonathan Nitzan and Shimshon Bichler found a negative correlation between a similar "stagflation index" and corporate amalgamation (i.e. mergers and acquisitions) in the United States since the 1930s. In their theory, stagflation is a form of political economic sabotage employed by corporations to achieve differential accumulation, in this case as an alternative to amalgamation when merger and acquisition opportunities have run out. [8]


A 2001 paper looking at large-scale surveys in Europe and the United States concluded that unemployment more heavily influences unhappiness than inflation. This implies that the basic misery index underweights the unhappiness attributable to the unemployment rate: "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."[9]

Misery and crime[edit]

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.[10] 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.

Data sources[edit]

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.


  1. ^ The US Misery Index
  2. ^ "US Misery Index by President". 
  3. ^ http://www.businessweek.com/stories/1999-02-21/reagan-vs-dot-clinton-whos-the-economic-champ
  4. ^ http://www.cato.org/publications/commentary/misery-mena
  5. ^ http://www.cato-at-liberty.org/the-iran-hyperinflation-fact-sheet/
  6. ^ http://www.cato.org/publications/commentary/irans-death-spiral-ii
  7. ^ http://www.cato.org/publications/commentary/bulgaria-fifteen-years-later
  8. ^ Capital as Power: A Study of Order and Creorder Nitzan and Bichler, 2009: pp. 384-386
  9. ^ 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
  10. ^ 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

External links[edit]