Goodhart's Law is one of those neat formulations that codifies something I've been trying to put my finger on for years: "once a social or economic indicator or other surrogate measure is made a target for the purpose of conducting social or economic policy, then it will lose the information content that would qualify it to play such a role."
That is, once you start measuring GDP as a way of gauging social welfare, people will start to figure out ways to make GDP go up without improving social welfare (say, by swapping dirty financial derivatives). Once Google starts measuring inbound links as a way of evaluating the importance of web-pages, people will figure out how to increase the inbound links to unimportant pages (splogging, blogspam). And once you measure fat or calorie content as a proxy for the healthfulness of food, manufacturers will figure out how to decrease fat and calories without making the food more healthful (reducing fat by adding sugar, reducing calories by adding poisonous artificial sweeteners).
The law was first stated in a 1975 paper by Goodhart and gained popularity in the context of the attempt by the United Kingdom government of Margaret Thatcher to conduct monetary policy on the basis of targets for broad and narrow money, but the idea is considerably older. It 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 organisations.
Brooks Brothers is the latest casualty of the Covid pandemic, filing for bankruptcy protection in New York today. The upscale clothiers, one of the last to make garments in the U.S., has been in business for 200 years. The closely held company, which is owned by Italian businessman Claudio Del Vecchio, filed for bankruptcy protection […]
I’m looking forward to interviewing Yuko Kaifu, president of JAPAN HOUSE Los Angeles, for a live streaming event on July 17 about virtual meetings and how the rest of the world can learn from Japanese-style business culture. It’s free and open to all, but you need to reserve a seat online in advance. Join us […]
On Thursday, Tesla denied media reports that it fired employees who chose to stay at home during the coronavirus pandemic, rather than expose themselves to possible infection at Elon Musk’s California factory.
With our smartphones serving as the vital tether that links us to the rest of our lives, it’s no wonder how low batteries and power emergencies can occasionally feel like a life-and-death situation. I mean, it’s usually not, of course…but darned if it doesn’t feel that way when your indicator is showing only 5 percent […]
Despite all of our most fervent hopes, it doesn’t appear the specter of COVID-19 will be leaving us anytime soon. If anything, the past few weeks seems to indicate the need for social distancing and other preventative measures will likely continue indefinitely from coast to coast for a very, very, very long time. Of course, […]
For all their amazing growth over the past 25 years, the most impressive thing about the monumental rise of Amazon might be the speed and sophistication of their lightning-fast delivery network. Sometimes it doesn’t even take 24 hours for the idea you ordered to be perched right on your front porch, ready for use. The […]