Goodhart’s Law
From Open Risk Manual
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Definition
Goodhart’s Law states that any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes
Examples
- The case against leverage ratios is that they may encourage banks to increase their risk per unit of assets, reducing their usefulness as an indicator of bank failure[1]
References
- ↑ The dog and the frisbee, Andrew G Haldane, Vasileios Madouros, Economist, Bank of England, 2012
