The bill is structure to lower the deficit,
No its structured to get a CBO score that says it will lower the deficit, which isn't the same thing. In terms of the blog post below it targets G* not G.
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The Importance of Goodhart's Law
March 2010 08:19AM
This article introduces Goodhart's law, provides a few examples, tries to explain an origin for the law and lists out a few general mitigations.
Goodhart's law states that once a social or economic measure is turned into a target for policy, it will lose any information content that had qualified it to play such a role in the first place. wikipedia The law was named for its developer, Charles Goodhart, a chief economic advisor to the Bank of England.
The much more famous Lucas critique is a relatively specific formulation of the same.
The most famous examples of Goodhart's law should be the soviet factories which when given targets on the basis of numbers of nails produced many tiny useless nails and when given targets on basis of weight produced a few giant nails. Numbers and weight both correlated well in a pre-central plan scenario. After they are made targets (in different times and periods), they lose that value.
We laugh at such ridiculous stories, because our societies are generally much better run than Soviet Russia. But the key with Goodhart's law is that it is applicable at every level. The japanese countryside is apparently full of constructions that are going on because constructions once started in recession era are getting to be almost impossible to stop. Our society centres around money, which is supposed to be a relatively good measure of reified human effort. But many unscruplous institutions have got rich by pursuing money in many ways that people would find extremely difficult to place as value-adding.
Recently GDP Fetishism by David henderson is another good article on how Goodhart's law is affecting societies.
The way I look at Goodhart's law is Guess the teacher's password writ large. People and instituitions try to achieve their explicitly stated targets in the easiest way possible, often obeying the letter of the law.
A speculative origin of Goodhart's law
The way I see Goodhart's law work, or a target's utility break down, is the following.
* Superiors want an undefined goal G.
* They formulate G* which is not G, but until now in usual practice, G and G* have correlated.
* Subordinates are given the target G*.
* The well-intentioned subordinate may recognise G and suggest G** as a substitute, but such people are relatively few and far inbetween. Most people try to achieve G*.
* As time goes on, every means of achieving G* is sought.
* Remember that G* was formulated precisely because it is simple and more explicit than G. Hence, the persons, processes and organizations which aim at maximising G* achieve competitive advantage over those trying to juggle both G* and G.
* P(G|G*) reduces with time and after a point, the correlation completely breaks down.
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