Goodhart's law

Goodhart's law is an adage often stated as, "When a measure becomes a target, it ceases to be a good measure". It is named after British economist Charles Goodhart, who is credited with expressing the core idea of the adage in a 1975 article on monetary policy in the United Kingdom: Any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes. 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. Numerous concepts are related to this idea, at least one of which predates Goodhart's statement. Notably, Campbell's law likely has precedence, as Jeff Rodamar has argued, since various formulations date to 1969. Other academics had similar insights at the time. Jerome Ravetz's 1971 book Scientific Knowledge and Its Social Problems 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 (1976). As applied in economics, the law is also implicit in the idea of rational expectations, 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.

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Related concepts (2)

Goodhart's law

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: The more any quantitative social indicator is used for social decision-making, the more subject it will be to corruption pressures and the more apt it will be to distort and corrupt the social processes it is intended to monitor. Campbell's law is related to the cobra effect, which is the sometimes unintended negative effect of public policy and other government interventions in economics, commerce, and healthcare.