The Fed Doesn't Care About Your Misery

Quantifying a human emotion is a tricky endeavor, whether the effort is focused on an individual or an entire society. But one 1960s economist's effort to attach some numbers to the notion of national misery resonates especially loudly today, at the end of a truly miserable year for most rank-a...

Full description

Saved in:
Bibliographic Details
Published in:Bloomberg businessweek (Online) 2022-12 (4767), p.8
Main Author: Regan, Michael P
Format: Magazinearticle
Language:English
Subjects:
Economic development
Inflation
Investors
Johnson, Lyndon Baines (1908-1973)
Monetary policy
Okun, Arthur
Unemployment
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Quantifying a human emotion is a tricky endeavor, whether the effort is focused on an individual or an entire society. But one 1960s economist's effort to attach some numbers to the notion of national misery resonates especially loudly today, at the end of a truly miserable year for most rank-and-file investors. Arthur Okun, who chaired the Council of Economic Advisers for a couple of years under President Lyndon Johnson, is known among economists for Okun's law, which establishes a relationship between unemployment and economic output. But he maybe best-remembered for creating what's called the misery index. The index's calculation is delightfully simple: Just add the rate of inflation to the unemployment rate. Each input is responsible for a sort oXeconomic misery. With the unemployment rate, it's intense misery for the percentage of the working population who are out of work and the members of die households who depend upon them. For inflation, it's less acute economic pain, but it affects a much larger swath of the population-everyone who's confronted with that suffocating feeling when consumer prices are rising faster than paychecks.
ISSN:0007-7135
2162-657X