An Estimated Australian Macroeconomic Misery Index

The degree of community satisfaction with alternative macroeconomic outcomes is of considerable interest to policy makers. Ad hoc measures of community macroeconomic welfare, so-called Misery Indexes, are commonly used as proxies of such welfare These indexes are very rudimentary and make implicit restrictive assumptions about the community's marginal rates of substitution among different macroeconomic outcomes. The current paper demonstrates a framework for statistically estimating the relative responsiveness of community welfare to such variables as unemployment, inflation, interest rates, real wages and measures of Australia's external performance. Morgan Gallup Poll data are used to proxy levels of community (dis)satisfaction .