The Misery Index: Only Part of the Story.

The article criticizes the use of the Misery Index as a gauge of macroeconomic performance. The use of the Misery Index by U.S. President George Bush symbolizes the almost exclusive focus of economic policy in the 1980s on growth and price stability. There is no doubt that the rate of economic growth and the rate of inflation should be two important criteria in judging the success of any economic policy. Assuming for the moment that distributional concerns are unimportant, the Misery Index still has several shortcomings that diminish its usefulness as a policy indicator. First, the index is generally used to judge the success or failure of economic policy in specified periods. Another limitation of the Misery Index is that it simply adds together the unemployment and inflation rates unweighted. Economic justice, like macroeconomic performance, has many dimensions, and capturing its trends can be difficult. Nonetheless, two prominent indicators of absolute and relative economic well-being are the poverty rate and overall income inequality. The sum of the two produces what we call the Poverty And Inequality (PAIN) index. Between 1980 and 1990, the Misery Index declined about 50 percent, a fact which the Bush administration heralded. At the same time, however, the PAIN index rose by about 8 percent, despite eight consecutive years of overall economic expansion.