misery index

Principally in the United States, an index of economic woe suffered by the general population, found by adding the rate of unemployment to the rate of inflation for the preceding 12 months, as measured by the Consumer Price Index. It originated as the Economic Discomfort Index, from Arthur M. Okun (1899 – 1980), sometime Chairman of the Council of Economic Advisors under President Johnson.

In the presidential campaign of 1980, Ronald Reagan renamed it the “misery index,” and that name has stuck, though economists sometimes refer to it as Okun's Index. Mr. Reagan claimed Carter had invented the term in the campaign four years earlier, but I have been unable to find it in any of his speeches.

Various attempts to improve upon the misery index have been made. The most widely noticed was by Harvard economist Robert Barro,¹ who added factors for GDP and interest rates. The origin of the index is sometimes wrongly attributed to him. A study comparing the misery index with the well-respected Michigan Index of Consumer Sentiment over the period 1951 – 1999 found it tracked it rather well.3

1. Robert Barro.
Reagan vs. Clinton: Who's the Economic Champ?
Business Week, 22 February 1999.

2. Petersen

3. Michael C. Lovell and Pao-Lin Tien.
Economic Discomfort and Consumer Sentiment.
(July 1999,). Available at SSRN: http://ssrn.com/abstract=222510 or DOI:10.2139/ssrn.222510

Examples

...a year like 1970 is difficult to sum up — you wish for one number that would tell all. Although it can be criticized as whimsically simplistic, there is such as index. It is offered by Arthur M. Okun, who was Lyndon Johnson's top economist.... Mr. Okun constructs a “discomfort factor” for the economy. It is derived by simply lumping together the unemployment rate and the annual rate of change in consumer prices — apples and oranges, surely, but it is those two bitter fruits which feed much of our economic discontent... The higher this index, the greater the discomfort — we're less pained by inflation if the job market is jumping, and less sensitive to other's unemployment if a placid price level is widely enjoyed...

Richard F. Janssen.
Wall Street Journal, 4 January 1971.

As a candidate four years ago, Mr. Carter adopted what he called the “misery index.” He added the rate of inflation to the rate of unemployment and for 1976 it totaled 12.5 percent. This was his “misery index” and he suggested that no President has a right to seek reelection with an index of 12.5 percent. Today by his own standard he does not deserve reelection. The misery index is two-thirds higher than it was four years ago–almost 20 percent.

Ronald Reagan.
A Vital Economy: Jobs, Growth, and Progress for Americans (speech).
24 October 1980.

Now, as to why I should be and he shouldn't be, when he was a candidate in 1976, President Carter invented a thing he called the misery index. He added the rate of unemployment and the rate of inflation, and it came, at that time, to 12.5 under President Ford. And he said that no man with that size misery index had a right to seek reelection to the Presidency. Today, by his own decision, the misery index is in excess of 20 percent, and I think this must suggest something.

Ronald Reagan.
1980 Ronald Reagan/Jimmy Carter Presidential Debate.
28 October 1980.

The political pressure on the administration to address these problems became intense. Arthur Okun, who'd been chairman of the Council of Economic Advisors under Johnson and who was known for his wry sense of humor, invented a “discomfort index” to describe the dilemma. It was simply the sum of the unemployment rate and the inflation rate. The discomfort index now stood at 10.6 percent, and since 1965 it had gone nowhere but up.*
* The discomfort index was later renamed the misery index and went on to figure in at least two presidential campaigns. Jimmy Carter used it to criticize President Ford in 1976, and Ronald Reagan used it to criticize President Carter in 1980.

Alan Greenspan.
The Age of Turbulence: Adventures in a New World.
New York: Penguin Press, 2007.
Page 61.

Resources

For the current value of the misery index, access www.miseryindex.us

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