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Okun’s Law ― the good, the bad, and the ugly of economics

15 February 2019|

As an economist, Arthur Okun undoubtedly had a talent for making the extremely obvious seem just that. His two most famous contributions to the field are prime examples of this. Indeed, it was Arthur Okun who took two indicators (inflation and unemployment), combined them, and created the Misery Index. Hardly groundbreaking, but it’s still in common use today. Likewise, the eponymous Okun’s Law, which simply regresses changes in the unemployment rate on economic growth, remains a mainstay of 21st-century macroeconomics, albeit a controversial one. So, what is Okun’s Law, and why is it controversial? Well, for a start, it’s not a law. It’s not even a theory.

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