Sunday, July 20, 2008

Hyper Misery Index

The misery index is an economic indicator, created by economist Arthur Okun, and found by adding:

Misery index = unemployment rate + inflation rate

It is assumed that both a higher rate of unemployment and a worsening of inflation both create economic and social costs for a country.

To make the metric a little more comprehensive, I propose a new formulation that recognizes another major social cost. I call it the Hyper Misery Index. I propose that it be arrived at by:

Hyper misery index = unemployment + inflation + nat'l debt rate

where:

Nat'l debt rate = Total Nat'l Debt (public & private) ÷ GDP

This metric recognizes that the more of a nation’s aggregate income goes to paying debt, the higher the misery will be. For example:
Misery index = unemployment + inflation
5 + 6 = 11
Hyper misery index = unemployment +inflation + nat'l debt rate
5 + 6 + 150 = 161!!!
This index could be useful in cases where, to add insult to people already suffering from both loss of income and rising consumer prices, everyone’s personal debt will suddenly be called by the creditor, and the government needs to raise taxes to pay down its stagerring debt.

The Hyper Misery Index. In this index, these people score the lowest misery.

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