Goodhart’s Law: Cobras, Bank Accounts & Unqualified Buyers
In a 1975 paper, British economist Charles Goodhart wrote, “Any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes.” This provided the genesis for Goodhart’s Law, which is commonly stated: When a measure becomes a target, it ceases to be a good measure. Anytime we use a number as a proxy for an outcome, we risk creating a host of unintended consequences. This appears to be especially true when it involves incentives.