Problems of Monetary Management

Goodhart, C. A. E. (1984). Problems of Monetary Management: The UK Experience. Papers in Monetary Economics, Vol. I (Reserve Bank of Australia, 1975); reprinted as ch. 4 of Monetary Theory and Practice: The UK Experience (London: Macmillan, 1984), ISBN 9780333360606.

Type

Book chapter

Intellectual base

Review or monograph

Year

1984

DOI

10.1007/978-1-349-17295-5_4

ISBN

9780333360606

Link

https://link.springer.com/chapter/10.1007/978-1-349-17295-5_4

Cited from

economics_finance, mathematics, philosophy, security_intelligence, speech_language_pathology, statistics_experimental_design, systems_cybernetics

Cited by

15 citations across 15 artifacts.

Each citation links to the sentence it supports in the citing article.

Primes

• Adversarial Boundary Navigation
  • Recognising the construct enables several distinct kinds of reasoning. Reasoning about which interventions bite: closing the gap, layering rules, and monitoring drift work, while punishing harder within the rule's current scope does not, because the opponent is already compliant with the rule. Reasoning about the co-evolutionary timeline: each defensive update has a half-life — how long until the opponent finds the next gap — and half-lives compress in fast environments such as spam and stretch in slow ones such as tax law.
• Aggregation
  • The fifth tension—that an optimized aggregation function is brittle under distributional shift—is the structural content of Goodhart's (1975) observation that any statistical regularity tends to collapse once pressure is placed upon it for control purposes, generalizing far beyond the monetary-policy setting in which it was first stated.

    This sourceOriginal statement that any statistical regularity collapses once pressure is placed on it for control purposes.

• Cue Outcome Decoupling
  • A cue. A perceptible, easy-to-measure proxy the actor can observe at decision time. An outcome. Something the actor actually cares about — food, safety, profit, ground truth — but cannot directly observe when deciding. A historical coupling. A regularity, produced by some mechanism, under which the cue reliably tracked the outcome and so became informative. A fast cue-response. Behavior well-tuned to that coupling, firing reliably on the cue. A slow update channel. The means by which the actor revises the cue's meaning, slower than the world can change it. A coupling-breaking event. The correlation is severed or reversed — by environmental shift, adversarial spoofing, or the actor's own optimization pressure (the Goodhart case) — while the cue itself remains present and readable.
• Discretization-Induced Artifact
  • Picking a bin width is picking what the instrument can show, so the cuts are part of the instrument, not a transparent window. The second-order causal facet. When a system reads its own discretization, the artefact becomes partially real — batched orders create real lumpiness, grade cutoffs create real bunching, tick sizes create real clustering — so the pattern is more than a representation warning.
• Goodhart's Law
  • In finance and macroeconomic policy (Goodhart's original substrate), targeting a monetary aggregate collapses the very regularity that motivated targeting it, and the pattern recurs with capital ratios and stress-test thresholds.
• Optimization
  • What happens when the proxy is optimized hard — do incentives align with purpose, or does Goodhart's pattern

    This sourceOriginal statement that any observed statistical regularity tends to collapse once pressure is placed upon it for control purposes—the canonical formulation of brittleness in optimized aggregation measures.

• Performativity
  • This is the structural core shared with Goodhart-adjacent phenomena, where a measure adopted as a target ceases to be a good measure precisely because announcing it reconfigures behavior.

    This sourceOriginal statement that any observed statistical regularity tends to collapse once pressure is placed upon it for control purposes—the canonical formulation of brittleness in optimized aggregation measures.

• Reification
  • The downstream errors are predictable: the score gets optimized against (people manipulate utilization to move the number without changing underlying creditworthiness — the gap between abstraction and substrate exploited),

Domain-specific

• Customer-Discovery Theater
  • A process with no overbearing decider is still theater if the evidence reaches no one with power to act on it; conversely a strong decider who can be moved by a readout is not running theater. Not Goodhart's law. Goodhart's law — in Marilyn Strathern's now-standard 1997 wording, "when a measure becomes a target, it ceases to be a good measure" — describes a measure degrading once it is made a target, generalising Goodhart's own observation about instruments of monetary control

    This sourceCited for Goodhart's own observation about instruments of monetary control, which this bullet generalises; the 1975 text could not be consulted for this check, and the quoted 'when a measure becomes a target' formulation is — as the sentence now says — Marilyn Strathern's 1997 wording, verified in her European Review paper.

• Progress Illusion
  • Progress illusion differs from Goodhart's Law in mechanism: Goodhart requires optimization pressure on the metric that deforms behaviour; progress illusion arises even without any such pressure, simply from the availability of the activity signal and the unavailability of the outcome measure

    This sourceFor the Goodhart half of the contrast only: Goodhart's 1975 formulation makes control pressure the operative variable — 'any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes' — which is the premise from which the article distinguishes progress illusion.

Mechanisms

• Cross-Boundary Reporting Dashboard
  • Once actors learn which indicator is on the dashboard, they optimize to keep that number quiet while the underlying harm continues — the mechanism's standing exposure to Goodhart's law, that a measure under pressure ceases to be a good measure

    This sourceStates that a statistical regularity tends to collapse when it is used as a target for control.

• Distortion Review Cadence
  • That is Goodhart's law turned on the reviewer — the visible marker quietly replaces the substance it stood for

    This sourceStates that an observed statistical regularity tends to collapse once it is used for control.

• Longitudinal Fit, Equity, and Burden Audit
  • Turned into a target, its metrics invite Goodhart's law

    This sourceStates the Goodhart principle that a statistical regularity can collapse when used for control.

• Policy Lever
  • That is Goodhart's law, and it is how a well-aimed lever gets gamed into uselessness.

    This sourceIdentifies Goodhart’s paper as the first reference to what became known as Goodhart’s law.

• Proxy-Relevance Audit
  • It is the working defense against Goodhart's law — that a measure adopted as a target degrades as the proxy is optimized apart from the thing it was meant to track.

    This sourceStates that an observed statistical regularity tends to collapse when pressure is placed on it for control purposes.

Verification

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Links previously used in the corpus

Before the registry existed this work was also linked 3 other ways.

• https://doi.org/10.1007/978-1-349-17295-5_4 ×6
• https://www.rba.gov.au/publications/rdp/1990/9013/conference-volumes.html ×4
• https://www.econbiz.de/Record/problems-of-monetary-management-the-u-k-experience-goodhart-charles/10002525062 ×1

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