Saturday, July 13, 2013

Quote of the Day: Goodhart's Law

Charles Goodhart, a former advisor to the Bank of England, and Emeritus Professor at the LSE, wrote in 1975 that

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

As a warning about the limits to activist economic or financial policy it can be put in more simple terms:

Any economic relationship which has been seen to apply in the past is very likely to stop working if the government tries to use it to control the economy. 

1 comment:

Jim said...

I have a feeling governments know all about Goodhart's Law. Its for this reason we now have worthless monopoly money, oh sorry I mean fiat currency. A system that has been tried and tried and tried again, but has NEVER worked, not once.

So that's what they use to control the economy. Great!