Tuesday, November 30, 2010

The Misery Index

What is happiness? There may be many definitions of happiness, making it hard to measure. Taking the glass half empty approach, some economists define happiness as the absence of misery. The so-called Misery Index is a new counterpoint to the Happiness Index I blogged about back in August, in relation to the Global Peace Index.

David Brancaccio, a blogger in economics and the host of public radio's Marketplace, has described an interesting alternative indicator called the misery index. Moody’s economist Pierre Cailleteau devised a formula to calculate a new version of the Misery Index wherein he added the unemployment rate to a country’s deficit as a percentage of its GDP.

More information is here: The Misery Index

As of August 2010, the U.S. Misery Index was at 10.75. It reached its highest level in June 1980, when it was at 21.98, and its lowest was way back in July 1953 when it reached 2.97. Visit the Misery Index website for lots of data on the MI for different countries over time.

The US Misery Index

Misery Index (10.77) = Unemployment rate (9.6) + Inflation rate (1.17)

The misery index was initiated by economist Arthur Okun, an adviser to President Lyndon Johnson in the 1960's. It is simply the unemployment rate added to the inflation rate. It is assumed that both a higher rate of unemployment and a worsening of inflation both create economic and social costs for a country. A combination of rising inflation and more people out of work implies a deterioration in economic performance and a rise in the misery index.

The Current Misery Index is
High: 21.98 June 1980
10.77 October 2010
Low: 2.97 July 1953

Tip o' the hat to Angelo for bringing this to my attention.