Okun developed the misery index (MI) during the 1960's in the United States. It reflects economic hardship on vulnerable populations as they are squeezed by rising prices and falling resources.
Parameters:
(1) percent unemployment (as a number from 0 to 100)
(2) percent inflation (as a number from 0 to 100)
misery index =
= (unemployment rate) + (inflation rate)
Interpretation:
• minimum MI: 0
• maximum MI: 200
• The higher the MI the greater the economic misery for people with limited means.
Limitation:
• Both the inflation rate and unemployment rate may be manipulated by a government, so that the true MI may be twice the value derived from official rates.
• A deflationary period can be miserable as well. In this situation the absolute value may be in order.
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