By: Ivan Habib

National Editor

In 1975, British economist Charles Goodhart formulated what would become Goodhart’s Law: once a statistical measure becomes a target of control, it ceases to be a reliable measure. When performance targets clash with public good, the issue is rarely only a lack of personal ethics. When institutions fail to meet expectations, we need to stop blaming individuals and push for change in the systems that reward the wrong outcomes.

The effects of these distorted goals are visible in education. A 2010 study by economists Derek Neal and Diane Whitmore Schanzenbach examined reforms in Chicago public schools, where success was primarily measured based on the number of students reaching a given test performance. They found that achievement gains were significantly concentrated right around the threshold, while the lowest and highest scoring students saw much less improvement. Even though percentage proficiency seems like a reasonable metric, it diverts attention away from those furthest from the threshold. Teachers are not unwilling to help struggling students; the system simply rewards them for concentrating their efforts where they can show the largest measurable gains. Blaming educators overlooks the incentives driving them.

Similar occurrences may also happen in healthcare. Medicare’s Hospital Readmissions Reduction Program financially penalizes hospitals with a greater-than-expected number of patients returning after being discharged. A 2022 Journal of American Medical Association Network Open study found that over half the apparent progress of the program was due to hospitals reclassifying re-admission as observation stays in order to avoid penalty. This response may look like dishonest gaming of the system by the hospital administrators. However, viewing this simply as honesty obscures the issue that the system rewards merely changing official statistics rather than improving patient health. Punishing hospitals for doing their best to respond to policies does little to address the underlying structure that encourages this behaviour in the first place.

This does not mean that standardized tests, readmission rates, or other targets for performance are useless or counterproductive. Objective measures ensure that both individuals and institutions are responsible for misconduct. The problem arises when accountability incentivizes solely hitting a number rather than translating to real outcomes. Replacing people without changing the underlying framework leads to the continuation of the same flawed compromises.

Public critique should, in similar fashion, focus less on holding individuals accountable. When voters reelect politicians who neglect constituent interests for political grandstanding, those leaders are simply optimizing for reelection. Replacing one official solves nothing if their successor faces the same pressures. Lasting change requires us to stop rewarding posturing and start demanding reforms that align institutional success with genuine community well-being.

(Sources: JAMA, National Bureau of Economic Research)