Goodhart's law
Imagine a system where success is perfectly measurable. What if the very act of trying to hit that measure distorts what you're trying to achieve? This intriguing paradox, known as Goodhart's Law, reveals a fundamental challenge in management, economics, and even our personal lives, showing how our pursuit of metrics can lead us astray. Goodhart's Law states that when a measure becomes a target, it ceases to be a good measure, fundamentally altering behavior. This principle originated in economics regarding monetary policy but has profound implications for any system that uses metrics to control or evaluate. The law highlights how individuals and organizations will adapt to game a system, often leading to unintended and counterproductive outcomes, especially in the pursuit of accountability.
AI Summary
Imagine a system where success is perfectly measurable. What if the very act of trying to hit that measure distorts what you're trying to achieve? This intriguing paradox, known as Goodhart's Law, reveals a fundamental challenge in management, economics, and even our personal lives, showing how our pursuit of metrics can lead us astray.
- Goodhart's Law states that when a measure becomes a target, it ceases to be a good measure, fundamentally altering behavior.
- This principle originated in economics regarding monetary policy but has profound implications for any system that uses metrics to control or evaluate.
- The law highlights how individuals and organizations will adapt to game a system, often leading to unintended and counterproductive outcomes, especially in the pursuit of accountability.
The Peril of Perfect Measurement
At its heart, Goodhart's Law uncovers a simple yet profound truth about human behavior and systems. It warns us that the moment we rely too heavily on a single metric to guide our actions, that metric's reliability can — almost inevitably — crumble.
This astute observation is named after Charles Goodhart, a British economist who first articulated the idea in a 1975 article. He was specifically looking at the complexities of managing monetary policy in the United Kingdom.
Goodhart's Original Insight
Goodhart's original statement was quite precise: 'Any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes.' It's a bit of a mouthful, but the essence is clear: what you observe changes when you try to control it.
His initial focus was criticizing the British Thatcher government's attempt to steer the economy by targeting specific measures of money supply. He argued that these targets, once imposed, would no longer accurately reflect the underlying economic reality they were meant to measure.
Echoes in History: Precursors and Parallels
While Goodhart gave the law its name, the idea itself has earlier echoes. Campbell's Law, for instance, predates it, noting that the more a quantitative indicator is used for social decision-making, the more likely it is to distort and corrupt the social processes it is intended to monitor.
Other thinkers, like Jerome Ravetz in 1971, discussed how complex systems can be 'gamed' when people prioritize their own goals over the assigned tasks. When those tasks are broken down into metrics, the incentive to game the system becomes even stronger.
Another closely related concept is the Lucas Critique (1976), which also warns that relationships observed in economic models may change drastically when policy changes are implemented. All these ideas underscore the dynamic and adaptive nature of human behavior within structured systems.
This phenomenon is also implicit in the theory of rational expectations, which posits that people aware of a system of rewards and punishments will optimize their actions within that system. If an employee is rewarded purely on the number of cars sold, they might sell more cars even at a loss, just to hit their target.
Beyond Economics: Universal Implications
Though rooted in monetary policy, Goodhart's Law stretches far beyond economics. It profoundly impacts how we select and pursue high-level targets in organizations, from businesses to non-profits and even government agencies.
Consider the world of academia. Mario Biagioli eloquently connected Goodhart's Law to the consequences of using citation impact to measure the importance of scientific publications. He noted, 'All metrics of scientific evaluation are bound to be abused.'
When a feature of the economy — or any system — is picked as an indicator, it inexorably ceases to function as that indicator because people start to game it. Researchers might prioritize 'citable' results over groundbreaking ones, or publish in journals known for high impact factors, rather than those most suitable for their work.
The Accountability Trap
Later writers generalized Goodhart's insight into a universal adage for all evaluation systems. As Keith Hoskin put it in 1996, 'Goodhart's Law' – That every measure which becomes a target becomes a bad measure – is inexorably, if ruefully, becoming recognized as one of the overriding laws of our times.
Hoskin suggested this inevitability stems from a modern invention: accountability. The desire to quantify performance and hold people responsible, while noble in intent, often creates the very conditions for Goodhart's Law to take hold.
Anthropologist Marilyn Strathern further linked this sentiment to the history of accountability itself, stretching back to Britain in the 1800s. She highlighted examples where clear, measurable targets, like achieving a certain exam grade, can make that grade a poorer discriminator of individual performance once it becomes an expectation.
This isn't to say measurement is inherently bad; rather, Goodhart's Law serves as a powerful reminder to use metrics wisely. The moment a measure stops being a tool for understanding and becomes a rigid target for control, its true value can vanish, leaving behind only the unintended consequences of human ingenuity.
Article
Goodhart's law
Goodhart's law is an adage that has been 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.
Priority and background
Goodhart's law
Charles Goodhart, for whom the adage is named, delivering a speech in 2012
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. Ravetz discusses how systems in general can be gamed, focusing 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. Jon Danielsson states the law as
Any statistical relationship will break down when used for policy purposes.
And suggested a corollary for use in financial risk modelling:
A risk model breaks down when used for regulatory purposes.
Mario Biagioli related the concept to consequences of using citation impact measures to estimate the importance of scientific publications:
All metrics of scientific evaluation are bound to be abused. Goodhart's law [...] 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.
Generalization
Goodhart's law
Later writers generalized Goodhart's point about monetary policy into a more general adage about measures and targets in accounting and evaluation systems. In a book chapter published in 1996, Keith Hoskin wrote:
'Goodhart's Law' – That every measure which becomes a target becomes a bad measure – is inexorably, if ruefully, becoming recognized as one of the overriding laws of our times. Ruefully, for this law of unintended consequences seems so inescapable. But it does so, I suggest, because it is the inevitable corollary of that invention of modernity: accountability.
In a 1997 paper on the misuse of accountability models in education, anthropologist Marilyn Strathern cited Hoskins expressing Goodhart's Law as "When a measure becomes a target, it ceases to be a good measure", and linked the sentiment to the history of accountability stretching back into Britain in the 1800s:
When a measure becomes a target, it ceases to be a good measure. The more a 2.1 examination performance becomes an expectation, the poorer it becomes as a discriminator of individual performances. Hoskin describes this as 'Goodhart's law', after the latter's observation on instruments for monetary control which led to other devices for monetary flexibility having to be invented. However, targets that seem measurable become enticing tools for improvement. The linking of improvement to commensurable increase produced practices of wide application. It was that conflation of 'is' and 'ought', alongside the techniques of quantifiable written assessments, which led in Hoskin's view to the modernist invention of accountability. This was articulated in Britain for the first time around 1800 as 'the awful idea of accountability' (Ref. 3, p. 268).
Examples
Goodhart's law
• The San Francisco Declaration on Research Assessment denounces several problems in science and as Goodhart's law explains, one of them is that measurement has become a target. The correlation between h-index and scientific awards is decreasing since widespread usage of h-index. • The International Union for Conservation of Nature's (IUCN) measure of extinction can be used to remove environmental protections, which resulted in IUCN becoming more conservative in labeling something as extinct. • In healthcare, the misapplication of metrics can lead to adverse outcomes. For instance, hospitals striving to reduce length of stay (LOS) may inadvertently discharge patients prematurely, leading to increased emergency readmissions. • According to Tom and David Chivers in How to Read Numbers, the law applied to the British government response to the COVID-19 pandemic when it announced a target of 100,000 COVID-19 tests per day—initially a target for tests actually carried out and later for maximum capacity of test-taking. The number of useful diagnostic tests was far lower than the government-reported number when it announced it had met the target. • 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.