Metrics Misuse — Goodhart’s Law

Now, metrics are not bad. But, they are often used in bad ways.

It might help to be aware of some of the side effects of mismanagement of metrics. From inadvertently creating behaviors that actively work against our best interest, to altering the meaning of the metric, mismanagement can do more harm than good.

Goodhart’s Law

Charles Goodhart is an economist and former advisor to the Bank of England. In 1975, Goodhart delivered two papers to a conference at the Reserve Bank of Australia. In those papers, Goodhart was discussing research and theory related to monetary policy and control in the United Kingdom. In the years leading up to 1975, existing monetary targets and the controls used to achieve the goals were no longer producing the results desired or expected. There had been what most considered to be evidence of a stable money demand in the United Kingdom. It was believed that the growth of money could be controlled through the setting of short-term interest rates. Higher interest rates correlated with lower money growth.

Goodhart warned, however, that policies and practices based on specific targets were flawed. Goodhart stated,

“Any statistical regularity will tend to collapse once pressure is placed upon it for control purposes.”

A common paraphrasing is, “When a measure becomes a target, it ceases to be a good measure.” When I talk about this, I tend to add, “And the target therefore no longer means what you…