The Federal Reserve Doesn’t Care About Your Misery

Attempting to quantify 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 years under President Lyndon Johnson, is known among economists for Okun’s law, which establishes a relationship between unemployment and economic output. But he may be 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 of economic 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 the 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.