In the 1960’s, Arthur Okun, an advisor to President Johnson designed an economic indicator call the National Misery Index. It is the sum of the unemployment rate added to the inflation rate. Misery was assumed to be worse when there was high unemployment and high inflation. Both conditions would cause economic and social chaos. There was also a Barro Misery Index that included Gross Domestic Product and the bank rate, but it never got the full back as the simple Misery Index.
Many people have never heard of it, and most of us never track the Misery Index. It seems to be one of those numbers bandied about by politicians. In fact, President Jimmy Carter referred to the Misery Index often during his campaign. It backfired on him because unemployment and inflation spiked during his presidency and hit an all time high – which led to his not winning a second term. Even though the Misery Index was developed in the 1960’s, it was easy to calculate it by month for previous administrations. Following World War II the following Misery Index averages were recorded: Truman – 7.88, Eisenhower – 6.26, Kennedy – 7.14, Johnson – 6.77, Nixon – 10.57, Ford – 14.93, Carter – 20.27, Reagan – 11.19, Bush (41) – 9.68, Clinton – 8.80 and Bush (43) – 8.10. Each president inherited the Misery Index ending value from his predecessor at whatever level it was when he took office.
Of course the average Misery Index doesn’t tell you the whole story. As a statistician, I look at the range – the high and low – along with other factors to fully understand the final number reported. The range for each president was: Truman – 10.16, Eisenhower – 8.07, Kennedy – 1.98, Johnson – 2.49, Nixon – 5.81, Ford – 3.76, Carter – 9.36, Reagan – 11.63, Bush (41) – 2.83, Clinton – 4.82 and Bush (43) – 5.76. The absolute lowest measured Misery Index was under Eisenhower at 2.97 and the highest was under Carter at 21.98. One other factor that I consider in evaluating numbers is the trend – are the numbers going up or down. In the case of the Misery Index, a downward trend is desirable.
The Misery Index focuses on implied misery in our society – higher unemployment and higher inflation – both infer that citizens in our society would be more miserable if the index number was higher. A Gross National Happiness (GNH) index was designed to reflect the quality of life in more psychological terms. Our current chief economic indicator, the Gross Domestic Product (GDP), measures the commerce of our country. The GDP contains costs reflecting positive contributions to our commerce, but, in reality, there are many costs that do not contribute to our commerce in a positive manner. Researches thought they could just deduct those costs and the GDP would be a better indicator of overall happiness in our society. Nevertheless, the GNH index attempted to truly reflect the social and psychological well-being of our population rather than commercial transactions.
The Misery Index is easy to state in mathematical terms – add inflation and unemployment and you have it. The GNH is more qualitative than quantitative involving the promotion of sustainable development, the promotion and preservation of cultural integrity and values, environmental conservation, and good governance. It is difficult to attach realistic numbers to measure the breadth of our country. A Genuine Progress Indicator was developed that focused on well-being and happiness only. Again, these factors are difficult to measure and Daniel Kahneman, a Princeton University psychologist, began recording this information using the ‘day reconstruction method’ which relies on diary entries recording memories of your previous day at work.
So, where am I going with this? I started out asking the question about your personal Misery Index. There is no such thing. You are either employed or not, and inflation is a factor in your life, but it is difficult to quantify. Happiness and misery are at opposite ends of a measurement. Why not look at factors in your life that you can easily quantify or allocate a personal qualitative assessment? I believe it should include wealth, health and other factors that should be balanced in your life.
I would propose that wealth could be measured in a variety of qualitative ways – are you better off today than last month or last year? Do you have more disposable cash today compared to last month or last year? Has your savings grown since last month or last year? Are your bills being paid on time compared to last month or a year ago? There are other similar questions that you could design into your personal index. As a qualitative measurement, you can determine your trend toward happiness or misery.
The same assessments can be done for your health (mental and physical). Are you genuinely feeling better today compared to last month or a year ago? Are you medical expenses higher today compared to last month or a year ago? Are you more active today compared to last month or a year ago? Is your memory as sharp today as it was a month ago or year ago? Are you sleeping better today compared to last month or last year? I would then add topics such as work, relationships, time management, spirituality, personal development, and uncertainty caused by politics, regulations, environment, security, individual freedom, etc.
A personal Misery or Happiness Index could be developed if you so chose. It would give you trends and allow you to reflect about what needs to be changed in your life to make a difference. It gives you the ability to begin controlling things that you may take for granted or assume that you have little or no control over. Attitude is a major driver of our misery and happiness. Controlling your attitude is the first place I would suggest to begin a trend or shift towards more happiness in your life. I suggested that these measurements be done today, last month and a year ago. Why is that? Today you can assess things pretty well – it is what it is. You can remember last month fairly easily, at least for the vast majority of us. Last year is a bit trickier, but it is not too far a time in the past to recollect where you were on certain issues.
It is interesting that when I worked for Memorex in the mid to late 70’s, the company did a random call to workers monthly and asked questions about a myriad of topics in which I (and other employees) chose to answer (not mandatory) about how well we were that day, a month ago and a year ago. I’m sure thoughts emanating from part of my brain led me to this blog.
Choices have consequences. Your Prosperity Professor, Red O’Laughlin
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