Coined by Charles Goodhart, the principle “When a measure becomes a target, it ceases to be a good measure” highlights the unintended repercussions of emphasizing a singular metric. Originating from monetary policy observations, the principle reveals how entities adjust their behaviors in response to metrics becoming primary objectives across diverse sectors.
Definition
Goodhart’s Law: “When a measure becomes a target, it ceases to be a good measure.”
Origins and Context
- The law is attributed to Charles Goodhart, a British economist who articulated this idea in 1975 while addressing monetary policy.
- Goodhart observed that when specific monetary aggregates (like M2 or M3 money supply figures) were used as targets, firms and the public would adapt their behaviors. This adaptiveness made the targeted aggregate unreliable, leading to the principle embodied in Goodhart’s Law.
Foundational Understanding
- Metrics vs. Targets: Metrics are tools to gauge quality or quantity. However, when a metric becomes the primary objective, stakeholders often adapt their actions, potentially undermining its effectiveness. For instance, in Goodhart’s foundational example, monetary aggregates became less effective as targets because financial institutions found ways to reclassify funds to meet targets without adhering to the policy’s intent.
- Complexity and Unintended Consequences: Over-reliance on a single metric can lead to unintended outcomes and simplifications that misrepresent a system’s true complexity. For example, an emphasis on reducing hospital wait times might lead to rushed consultations, compromising patient care quality.
Core Components and Nuances
- Pervasiveness: The phenomena described by Goodhart’s Law can be observed across domains, highlighting its universal applicability.
- Inherent Vulnerability: Metrics, when overemphasized, are susceptible to manipulation.
Relevant Examples
- Education: Schools evaluated by student test scores might “teach to the test,” overlooking other crucial educational aspects.
- Business: Companies focusing on quarterly profits might undervalue long-term investments.
- Healthcare: Hospitals gauged mainly by patient volume might compromise care quality.
- Academia: If researchers are judged primarily by the number of papers they publish, the focus might shift to quantity over quality.
Interconnected Concepts
- Campbell’s Law: “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.”
- Lucas Critique: In economics, this principle suggests that when policies change, economic agents adjust their behaviors, affecting the reliability of past data for future predictions.
Practical Implications
As the landscape evolves, metrics undergo periodic reviews to ensure their relevance and to avoid the pitfalls highlighted by Goodhart’s Law.
