Goodhart's law


Goodhart's law is an adage named after British economist Charles Goodhart, later phrased by anthropologist Marilyn Strathern as When a measure becomes a target, it ceases to be a good measure. One way in which this can occur is individuals trying to anticipate the effect of a policy and then taking actions that alter its outcome.

Formulation

Goodhart first advanced the idea in his 1975 article discussing monetary policy in the United Kingdom, Problems of Monetary Management: the U.K. Experience:
It later became used widely to criticize the British Thatcher government for trying to conduct monetary policy on the basis of targets for broad and narrow money.

Priority and background

There are numerous concepts related to this idea, at least one of which predates Goodhart's statement of 1975. Notably, Campbell's law likely has precedence, as Jeff Rodamar has argued, since various formulations date to 1969. Other academics had similar insights during this time period. 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 are instead able to achieve 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. 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. Jon Danielsson quotes the law as Any statistical relationship will break down when used for policy purposes, and suggests a corollary to the law for use in financial risk modelling: A risk model breaks down when used for regulatory purposes. Mario Biagioli has related the concept to consequences of using citation impact measures to estimate the importance of scientific publications:
The law is illustrated in the 2018 book The Tyranny of Metrics by Jerry Z. Muller.