Why Targetting NGDP WIll Fail, Redux
I've posted on this before, but I just ran across some quotes on the matter, so I will share them with you. The following is from my review of James C. Scott's Two Cheers for Anarchism:
Scott also takes on the Bush administration’s “No Child Left Behind” legislation, which predictably resulted in teachers “teaching to the test” and in fact often falsifying results to meet standards imposed from the top downward. Scott explains the perverse results by invoking “Goodheart’s law [which] holds that ‘when a measure becomes a target it ceases to be a good measure.’ And Matthew Light clarifies: ‘An authority sets some quantitative standard to measure a particular achievement; those responsible for meeting that standard do so, but not in the way which was intended.’” [Emphasis mine.]Looking backwards, we might conclude, with Scott Sumner and other monetarists, that stable NGDP is a good measure of whether the monetary authorities have been doing their job. But once it becomes their target, its meaning will change, and it will cease to be a good measure!