Economics & Finance
Goodhart's Law
When a measure becomes a target, it ceases to be a good measure. Performance metrics lose their predictive power and informational value once they are optimized as ends in themselves, creating perverse incentives and misallocating resources.
Read the daily articles behind this idea on the Chinese edition.
Related principles
- → LinksSignaling & Capital Allocation
- → LinksDisclosure Paradox of Externalities
- → LinksRevealed Preference Over Stated Preference
- → LinksStatic vs. Dynamic Income Distribution
- → LinksPrincipal-Agent Problem Going Public
- → LinksCentralization of Planning Authority
- → LinksMedium Shift Visibility Paradox
- → LinksPerverse Incentive Structure
- → LinksHidden Cost Externality