Remember the 1960s? The 1970s? Back then, inflation surged from one peak to another but failed to deliver the low unemployment rates promised by the Phillips curve. In fit of frustration, economist Arthur Okun invented what he called the misery index—the sum of the inflation and unemployment rates. As the chart shows, those were miserable years indeed.
we don’t hear much about the misery index. True, the index hit a
20-year peak in the depths of the Great Recession, but people hardly
noticed. Now it is back to a relatively comfortable level and still
headed down. In an era of chronically low inflation, Okun’s index just
isn’t miserable enough to make the headlines. Couldn’t we add something
to spice it up a little?
Spicing Up the Misery Index
Economists Robert Barro, and more recently, Steve Hanke,
have tried to do just that. Both have added measures of real output
growth and an interest rate to the misery index in an attempt to capture
macroeconomic factors other than inflation and unemployment that make
people unhappy. >>>Read more
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