Goodhart's Law
Goodhart's Law is an observation and principle in economics and social sciences that highlights the potential pitfall of relying too heavily on a specific metric or indicator as a target for decision-making or evaluation. The law is named after the British economist Charles Goodhart, who first articulated this concept in the 1970s. The essence of Goodhart's Law can be summarized as follows:
"When a measure becomes a target, it ceases to be a good measure."
In other words, when individuals or organizations use a particular metric as a primary goal or target for their actions, there is a risk that people will manipulate or optimize that metric in ways that may not reflect the true underlying factors or the original purpose of the metric. This can lead to unintended and potentially adverse consequences.
Goodhart's Law is often invoked in various contexts to caution against the overreliance on quantitative measures in decision-making. Here are a few examples of how it applies:
Economics: In the realm of monetary policy, if a central bank focuses solely on controlling a single economic indicator, such as the money supply, to manage inflation, people may adjust their behavior to circumvent the control measures, rendering the indicator less effective.
Education: If standardized test scores become the primary measure of educational quality, schools and teachers might "teach to the test," narrowing the curriculum and potentially neglecting other important aspects of education.
Business: In a business context, if a company sets sales targets as the primary performance metric for employees, salespeople might resort to aggressive tactics or unethical practices to meet those targets, compromising customer satisfaction and long-term business success.
Healthcare: When healthcare providers are incentivized based on patient satisfaction scores alone, they may prioritize pleasing patients over providing medically appropriate care, potentially leading to unnecessary treatments or prescription of opioids.
Software Development: In software development, if lines of code written becomes a key performance indicator for programmers, they may produce verbose and unnecessarily complex code rather than focusing on code quality and efficiency.
The key takeaway from Goodhart's Law is that metrics and indicators should be used judiciously, and decision-makers must be aware of the potential for unintended consequences when a metric becomes the sole target. It underscores the importance of considering the broader context and goals when setting performance targets and evaluating outcomes.