In these days of worldwide economic turmoil, there’s a lot of talk about the “misery index” – which is calculated by adding together the unemployment rate and the annual inflation rate.
The “misery index” was invented by economist Arthur Okun in the 1970’s while he was a scholar at the Brookings Institution. Previously he had served as a member of President Lyndon B. Johnson’s Council of Economic Advisers and a professor at Yale.
The timing of the invention of the term “misery index” was not accidental. In the 1970’s, the United States — and, indeed, much of the rest of the world — suffered from both high inflation and high unemployment.
The situation was called “stag-flation.” It was caused primarily by an OPEC boycott on oil shipments from the Middle East to the United States and other Western nations in retaliation for American assistance to Israel during the Yom Kippur War.
The oil embargo drove up prices and slowed down economic growth.
In the midst of this series of inter-locked developments, the stock market crashed, as it has done during the current crisis.
During the Richard Nixon administration (1969-74), the “misery index” rose as high as 13.61.
The peak during the Gerald R. Ford presidency (1974-77) was 19.9, and was a major factor in his defeat in the 1976 Presidential election.
During Jimmy Carter’s presidency (1977-1981), the “misery index” hit 21.98, and was at least partly responsible for his defeat in the 1980 election.
The most recent “misery index” reading is 7.8. History’s appraisal of George Bush’s presidency no doubt will be affected by the ups and downs of the index during his term.
While at Brookings, Arthur Okun explored various aspects of his “misery index” invention in a number of books, including: “Curing Chronic Inflation” (1978), “Prices and Quantities, a Macroeconomic Analysis” (1981), “The Political Economy of Prosperity” (1970), and “Equality and Efficiency, the Big Trade-Off” (1975).