The Men’s Underwear Index

Arguably the most famous central banker of all time, Alan Greenspan is frequently referred to as “the maestro” for his work as the chairman of the Federal Reserve. Despite his renown, he was also known to use quite an obscure index to assess the overall health of the American economy. Understanding the index is simple, decreasing sales of men’s underwear indicate a poor overall state of the economy at large while increasing sales suggest health. His reasoning: only in times when people are comfortable and confident in the economy will the spend money on something they do not necessarily need. He believed that to an extent, people did not actually need to replace their underwear, they would choose to based on how comfortable they were given their current level of wealth and employment prospects. Because people did not need underwear, their purchases would indicate economic health.

Did this index actually help predict American economic situations? Greenspan seemed to think so but it is hard to know for certain. The entire theory is based on the bold assumption that new underwear is a want, not a need… a bold assumption.


Read more here:

About Declan Peloso

Declan is a second year Economics and Business student, focusing on finance at the University of Puget Sound

Leave a Reply

Your email address will not be published. Required fields are marked *