What Is the Misery Index?
The pain index represents an unpleasant economic situation. It involves the question of how to measure economic conditions with macroeconomic indicators. Macroeconomic indicators include gross domestic product (GDP), price index, and unemployment rate (in the open economy, balance of payments and exchange rates). The actual indicator used in the macroeconomic conditions indicator is the unemployment rate, and the nominal indicator is the inflation rate.
- The combination of these two indexes can indicate the state of the macro economy. The indicators combined for the two indexes are the pain index, the unpopular index, and the stability policy index.
- The Misery Index was proposed by economist Arthur Okun.
- The index believes that unemployment and
- (A) pain index and happiness of residents
- A large survey of data in Europe and the United States in 2001 showed that the most basic pain index highlights the unhappiness caused by unemployment. The survey shows that people can accept a 1.7% increase in inflation instead of a 1% increase in the unemployment rate, which shows that more unhappiness among residents comes from unemployment.
- (B) Pain Index and US Presidential Campaign
- This index was proposed by the US government in 1975 and has been widely used since. The higher the inflation rate, the less successful is the stabilization of prices; the higher the unemployment rate, the less successful is the achievement of full employment. The higher the pain index, the worse the macroeconomic conditions and the less successful the policy. Each society has a different pain index safety line at different times. Above this safety line, appropriate policies are bound to be adopted. Therefore, the pain index is also one of the basis for decision makers.
- During the 1976 US presidential campaign, candidate Jim Carter used the pain index to stand out from the fierce competition. At that time, the slogan was "People who contribute a lot to this country's pain index are not eligible to run for president." At that time, the pain index was 13.75. But it is quite ironic that Carter's pain index during the reelection campaign reached a record high of 21.98, which is what is called "successful but also defeated."
- The picture above shows the pain index during the presidency of the United States. We see that the highest pain index is President Carter (1977-1980) mentioned above, and the lowest pain index is Eisenhower (1953-1960).
- (Three) historical data