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Misery Index

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Steve H. Hanke, a Senior Fellow and Director of the Troubled Currencies Project at the Cato Institute, breaks-down the misery index. Read more here for the misery index on a global scale.

 misery indexThe Great Recession grinds on. And as it does, politicians of all stripes ask, usually behind closed doors, “Just how miserable are our citizens?” The chattering classes offer a variety of opinions. As it turns out, there is a straightforward way to measure what is termed the misery index.

The late Arthur Okun, a distinguished economist who served as chairman of the President’s Council of Economic Advisers during President Johnson’s administration, developed the original misery index for the United States. Okun’s index is equal to the sum of the inflation and unemployment rates.

Harvard Professor Robert Barro amended the misery index by also including the 30-year government bond yield and the output gap for real GDP. Barro used his index to measure the change in misery during a president’s term.

From these metrics, we would anticipate that if there were a high level of misery in a country, and the current politicians increased the level of misery, then this increase would be borne out by looking at the polls. In other words, we expect citizens to be aware of misery, and approve or disapprove accordingly.

The data in the misery index chart speak loudly. Contrary to left-wing dogma, the Reagan “free-market years, ” were very good ones. And the Clinton years of Victorian fiscal virtues– when President Clinton proclaimed in his January 1996 State of the Union address: “the era of big government is over” — were also very good ones.

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E.J. Smith - Your Survival Guy

Preparing your investments and family for when disaster strikes.
E.J. Smith is the Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH, where he completed course-work in Practical and Defensive Handgun, Conceal Carry Pistol, Shotguns, Precision Scope Rifle and Kidnapping Prevention. E.J. plays a Yamaha Recording Custom drum set with Zilldjian cymbals. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com. Sign up here to receive all the best content from Richardcyoung.com each week.

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