In 1970 everyone was feeling bad about the economy. How bad?
To put a number to the pervasively negative vibe, Arthur Okun created the
“misery index:” the sum of inflation and unemployment rates.
But now everyone is puzzled. Why was the economic vibe of
2024 bad enough to get the Democrats thrown out of office? After all, Okun’s
misery index for the quarter leading up to the election stood at just 6.8,
which was actually a whisker below its average of 6.9 for the Trump years. What
is more, it had been falling almost continuously for nine quarters after
peaking in April 2022.
Already six months before the election, when Okun’s index
was still at 7.2, Paul
Krugman wrote that for most Americans, the answer to the question,
“Are you better off than you were four years ago?” should clearly be, “Yes.” But
Krugman ruefully added, “for reasons that still remain unclear, many seem
disinclined to believe it.” What went wrong?
Maybe part of the problem is that we need a new misery index. Maybe the Okun version just doesn’t capture what makes people miserable these days. In the many postmortems asking what Krugman and many others might have been missing, four factors come up repeatedly. In what follows, I use them as the building blocks of a 21st century misery index.
