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TagCharles Goodhart

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Cherry trees in full bloom at the University of Washington campus

Goodhart’s Law and Scientific Innovation in Academia

Many university researchers are leaving academia so they can actually get things done

British economist Charles Goodhart was a financial advisor to the Bank of England from 1968 to 1985, a period during which many economists (“monetarists”) believed that central banks should ignore unemployment and interest rates. Instead, they believed that central banks should focus on maintaining a steady rate of growth of the money supply. The core idea was that central banks could ignore economic booms and busts because they are short-lived and self-correcting (Ha! Ha!) and should, instead, keep some measure of the money supply growing at a constant rate in order to keep the rate of inflation low and constant. The choice of which money supply to target was based on how closely it was statistically correlated with GDP. The Read More ›