Charles Goodhart

Main

Charles Goodhart is an emeritus professor at the London School of Economics (LSE) who previously worked at the Bank of England for 17 years as a monetary adviser and chief adviser. He is best known for formulating Goodhart's Law, which states: "When a measure becomes a target, it ceases to be a good measure."

Key achievements:

• Served as Chief Adviser at the Bank of England from 1980-1985

• Co-founded the Financial Markets Group research center at LSE in 1987

• Served on the Bank of England's Monetary Policy Committee from 1997-2000

• Authored influential books on monetary policy and central banking

• Appointed Commander of the Order of the British Empire (CBE) and Fellow of the British Academy (FBA) for his contributions to economics

Terms

• Goodhart's Law: An adage stating that when a measure becomes a target, it ceases to be a good measure. This is because people start to game the system to meet the target rather than focusing on the underlying goal the measure was intended to promote.

• Monetary Policy Committee: The committee at the Bank of England responsible for setting interest rates to meet the government's inflation target. Goodhart served as an outside independent member from 1997-2000.

• Financial Markets Group: A research center at LSE that Goodhart co-founded in 1987 with Mervyn King to study financial markets and institutions.

Analogy

Just as a doctor who has worked in both research and clinical practice can bring valuable perspective to healthcare policy, Charles Goodhart's experience in both academia and central banking has enabled him to make important contributions to economic policy debates. His work bridges theory and practice in a way that has influenced policymakers around the world.

Misconception

Many people assume that economists who work in central banks or other policy institutions are primarily interested in abstract theories rather than real-world problems. However, Goodhart's career demonstrates that academic economists can play a vital role in shaping policy and grappling with concrete economic challenges. His work has always been motivated by a desire to understand and improve the functioning of the financial system.

History

1. 1936: Born in London, England

2. 1968: Joins the Bank of England as an economist

3. 1980: Appointed Chief Adviser at the Bank of England

4. 1985: Leaves the Bank of England to become Norman Sosnow Professor of Banking and Finance at LSE

5. 1987: Co-founds the Financial Markets Group research center at LSE

6. 1997: Appointed to the Bank of England's newly formed Monetary Policy Committee

7. 2000: Steps down from the Monetary Policy Committee

8. 2002: Becomes Emeritus Professor at LSE, continues research with the Financial Markets Group

How to use it

1. As a student, look for opportunities to learn from professors like Goodhart who have experience in both academia and policy. Their insights can help bridge the gap between theory and practice.

2. As a researcher, consider the policy implications of your work and look for ways to engage with policymakers. Goodhart's career shows the value of academics who are willing to get involved in real-world policy debates.

3. As a policymaker, draw on the expertise of academics like Goodhart who can bring rigorous analysis to bear on policy challenges. Don't assume that ivory tower theories are irrelevant to practical policymaking.

Facts

• Goodhart earned his undergraduate degree in history from Cambridge University before switching to economics for his graduate studies.

• He has authored over 20 books on monetary policy, central banking, and financial markets over his career.

• In 2016, Goodhart was appointed a Companion of Honour (CH) by Queen Elizabeth II for his services to economics.

• He is the co-founder of the European Money and Finance Forum (SUERF), a network of central bankers, bankers, and academics.

• Goodhart has been a vocal critic of the euro, arguing that the single currency faces significant challenges without a fiscal union.