An Alternative Approach to the Okun’s Index of Economic Discomfort

The great recession has refocused the attention on the consequences of economic fluctuations on population’s well-being. The so-called ‘Misery Index’ (or the Economic Discomfort Index, proposed by Ar-thur Okun) is probably the first attempt to develop a composite indicator to track the state of health of the macro-economy during business cycle. In this note, we provide a new approach to the misery index. Using the expectations-augmented Phillips curve and the Okun’s law, we derive a simple indicator based on the output gap and the cyclical unemployment. This reformulation improves the misery index, without losing its simplicity.