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Goodhart's law is an
adage An adage (; Latin: adagium) is a memorable and usually philosophical aphorism that communicates an important truth derived from experience, custom, or both, and that many people consider true and credible because of its longeval tradition, i.e. ...
often stated as, "When a measure becomes a target, it ceases to be a good measure". It is named after British
economist An economist is a professional and practitioner in the social sciences, social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy. Within this ...
Charles Goodhart Charles Albert Eric Goodhart, (born 23 October 1936) is a British economist. His career can be divided into two sections: his term with the Bank of England and its associated public policy; and his academic work with the London School of Econom ...
, who is credited with expressing the core idea of the adage in a 1975 article on
monetary policy Monetary policy is the policy adopted by the monetary authority of a nation to control either the interest rate payable for very short-term borrowing (borrowing by banks from each other to meet their short-term needs) or the money supply, often a ...
in the United Kingdom: It was used to criticize the British Thatcher government for trying to conduct monetary policy on the basis of targets for broad and narrow money, but the law reflects a much more general phenomenon.


Priority and background

Numerous concepts are related to this idea, at least one of which predates Goodhart's statement. Notably,
Campbell's law Campbell's law is an adage developed by Donald T. Campbell, a psychologist and social scientist who often wrote about research methodology, which states: Applications Campbell's law is related to the cobra effect, which is the sometimes uninte ...
likely has precedence, as Jeff Rodamar has argued, since various formulations date to 1969. Other academics had similar insights at the time.
Jerome Ravetz Jerome (Jerry) Ravetz is a philosopher of science. He is best known for his books analysing scientific knowledge from a social and ethical perspective, focussing on issues of quality. He is the co-author (with Silvio Funtowicz) of the NUSAP no ...
's 1971 book ''
Scientific Knowledge and Its Social Problems ''Scientific Knowledge and Its Social Problems'' is a 1971 book by Jerome Ravetz Jerome (Jerry) Ravetz is a philosopher of science. He is best known for his books analysing scientific knowledge from a social and ethical perspective, focussing ...
'' also predates Goodhart, though it does not formulate the same law. He discusses how systems in general can be gamed, focuses on cases where the goals of a task are complex, sophisticated, or subtle. In such cases, the persons possessing the skills to execute the tasks properly seek their own goals to the detriment of the assigned tasks. When the goals are instantiated as metrics, this could be seen as equivalent to Goodhart and Campbell's claim. Shortly after Goodhart's publication, others suggested closely related ideas, including the
Lucas critique The Lucas critique, named for American economist Robert Lucas's work on macroeconomic policymaking, argues that it is naive to try to predict the effects of a change in economic policy entirely on the basis of relationships observed in historic ...
(1976). As applied in
economics Economics () is the social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. Economics focuses on the behaviour and intera ...
, the law is also implicit in the idea of
rational expectations In economics, "rational expectations" are model-consistent expectations, in that agents inside the model A model is an informative representation of an object, person or system. The term originally denoted the plans of a building in late 16 ...
, a theory in economics that states that those who are aware of a system of rewards and punishments will optimize their actions within that system to achieve their desired results. For example, if an employee is rewarded by the number of cars sold each month, they will try to sell more cars, even at a loss. While it originated in the context of market responses, the law has profound implications for the selection of high-level targets in organizations.
Jon Danielsson Jon Danielsson is an economist teaching at the London School of Economics and active in domestic and international policy debates. He received his PhD in the economics of financial markets from Duke University in 1991. Career Danielsson's resear ...
states the law as He suggested a corollary for use in financial risk modelling: Mario Biagioli related the concept to consequences of using
citation impact Citation impact is a measure of how many times an academic journal article or book or author is cited by other articles, books or authors. Citation counts are interpreted as measures of the impact or influence of academic work and have given rise ...
measures to estimate the importance of scientific publications: The law is illustrated in the 2018 book ''The Tyranny of Metrics'' by Jerry Z. Muller.


Generalization

Later writers generalized Goodhart's point about monetary policy into a more general adage about measures and targets in accounting and evaluation systems. In a book chapter published in 1996, Keith Hoskin wrote: In a 1997 paper responding to the work of Hoskin and others on financial accounting and grades in education, anthropologist
Marilyn Strathern Dame Ann Marilyn Strathern, Dame Commander of the Most Excellent Order of the British Empire, DBE, Fellow of the British Academy, FBA (née Evans; born 6 March 1941) is a Great Britain, British anthropology, anthropologist, who has worked lar ...
expressed Goodhart's Law as "When a measure becomes a target, it ceases to be a good measure," and linked the sentiment to the history of accounting stretching back into Britain in the 1800s:


Examples

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See also

*
Campbell's law Campbell's law is an adage developed by Donald T. Campbell, a psychologist and social scientist who often wrote about research methodology, which states: Applications Campbell's law is related to the cobra effect, which is the sometimes uninte ...
– "The more any quantitative social indicator is used for social decision-making, the more subject it will be to corruption pressures" *
Cobra effect A perverse incentive is an incentive that has an unintended and undesirable result that is contrary to the intentions of its designers. The cobra effect is the most direct kind of perverse incentive, typically because the incentive unintentionall ...
- when incentives designed to solve a problem end up rewarding people for making it worse *
Gaming the system Gaming the system (also rigging, abusing, cheating, milking, playing, working, or breaking the system, or gaming or bending the rules) can be defined as using the rules and procedures meant to protect a system to, instead, Psychological manipula ...
*
Lucas critique The Lucas critique, named for American economist Robert Lucas's work on macroeconomic policymaking, argues that it is naive to try to predict the effects of a change in economic policy entirely on the basis of relationships observed in historic ...
– it is naive to try to predict the effects of a change in economic policy entirely on the basis of relationships observed in historical data *
McNamara fallacy The McNamara fallacy (also known as the quantitative fallacy), named for Robert McNamara, the US Secretary of Defense from 1961 to 1968, involves making a decision based solely on quantitative observations (or metrics) and ignoring all others. ...
– involves making a decision based solely on quantitative observations (or
metrics Metric or metrical may refer to: * Metric system, an internationally adopted decimal system of measurement * An adjective indicating relation to measurement in general, or a noun describing a specific type of measurement Mathematics In mathema ...
) and ignoring all others *
Overfitting mathematical modeling, overfitting is "the production of an analysis that corresponds too closely or exactly to a particular set of data, and may therefore fail to fit to additional data or predict future observations reliably". An overfitt ...
*
Reflexivity (social theory) In epistemology, and more specifically, the sociology of knowledge, reflexivity refers to circular relationships between cause and effect, especially as embedded in human belief structures. A reflexive relationship is bidirectional with both the ...
*
Reification (fallacy) Reification (also known as concretism, hypostatization, or the fallacy of misplaced concreteness) is a fallacy of ambiguity, when an abstraction (abstract belief or hypothetical construct) is treated as if it were a concrete real event or physical ...
* Surrogation * Metric fixation


References


Further reading

* * * {{Unintended consequences 1975 in economics Adages Economics laws Economics of regulation Eponyms