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Goodhart's law


Goodhart's law is named after economist Charles Goodhart, paraphrasing: "When a measure becomes a target, it ceases to be a good measure."

Goodhart first used it in a 1975 paper, and it later became used popularly to criticize the United Kingdom government of Margaret Thatcher for trying to conduct monetary policy on the basis of targets for broad and narrow money. However, the concept is considerably older, and closely related ideas are known under different names, e.g. Campbell's law (1976), and the Lucas critique (1976). The law is implicit in the economic idea of rational expectations. While it originated in the context of market responses, the law has profound implications for the selection of high-level targets in organizations.

Any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes.

A risk model breaks down when used for regulatory purposes.

All metrics of scientific evaluation are bound to be abused. Goodhart’s law (named after the British economist who may have been the first to announce it) states that when a feature of the economy is picked as an indicator of the economy, then it inexorably ceases to function as that indicator because people start to game it.


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