Decomposing the misery index: A dynamic approach

YesThe misery index (the unweighted sum of unemployment and inflation rates) was probably the first attempt to develop a single statistic to measure the level of a population’s economic malaise. In this letter, we develop a dynamic approach to decompose the misery index using two basic relations of modern macroeconomics: the expectations-augmented Phillips curve and Okun’s law. Our reformulation of the misery index is closer in spirit to Okun’s idea. However, we are able to offer an improved version of the index, mainly based on output and unemployment. Specifically, this new Okun’s index measures the level of economic discomfort as a function of three key factors: (1) the misery index in the previous period; (2) the output gap in growth rate terms; and (3) cyclical unemployment. This dynamic approach differs substantially from the standard one utilised to develop the misery index, and allow us to obtain an index with five main interesting features: (1) it focuses on output, unemployment and inflation; (2) it considers only objective variables; (3) it allows a distinction between short-run and long-run phenomena; (4) it places more importance on output and unemployment rather than inflation; and (5) it weights recessions more than expansions

Recurrent, Robust and Scalable Patterns Underlie Human Approach and Avoidance

BACKGROUND. Approach and avoidance behavior provide a means for assessing the rewarding or aversive value of stimuli, and can be quantified by a keypress procedure whereby subjects work to increase (approach), decrease (avoid), or do nothing about time of exposure to a rewarding/aversive stimulus. To investigate whether approach/avoidance behavior might be governed by quantitative principles that meet engineering criteria for lawfulness and that encode known features of reward/aversion function, we evaluated whether keypress responses toward pictures with potential motivational value produced any regular patterns, such as a trade-off between approach and avoidance, or recurrent lawful patterns as observed with prospect theory. METHODOLOGY/PRINCIPAL FINDINGS. Three sets of experiments employed this task with beautiful face images, a standardized set of affective photographs, and pictures of food during controlled states of hunger and satiety. An iterative modeling approach to data identified multiple law-like patterns, based on variables grounded in the individual. These patterns were consistent across stimulus types, robust to noise, describable by a simple power law, and scalable between individuals and groups. Patterns included: (i) a preference trade-off counterbalancing approach and avoidance, (ii) a value function linking preference intensity to uncertainty about preference, and (iii) a saturation function linking preference intensity to its standard deviation, thereby setting limits to both. CONCLUSIONS/SIGNIFICANCE. These law-like patterns were compatible with critical features of prospect theory, the matching law, and alliesthesia. Furthermore, they appeared consistent with both mean-variance and expected utility approaches to the assessment of risk. Ordering of responses across categories of stimuli demonstrated three properties thought to be relevant for preference-based choice, suggesting these patterns might be grouped together as a relative preference theory. Since variables in these patterns have been associated with reward circuitry structure and function, they may provide a method for quantitative phenotyping of normative and pathological function (e.g., psychiatric illness).National Institute on Drug Abuse (14118, 026002, 026104, DABK39-03-0098, DABK39-03-C-0098); The MGH Phenotype Genotype Project in Addiction and Mood Disorder from the Office of National Drug Control Policy - Counterdrug Technology Assessment Center; MGH Department of Radiology; the National Center for Research Resources (P41RR14075); National Institute of Neurological Disorders and Stroke (34189, 05236