As central banks struggle with the efficacy of their policies, could it be that their models are still to blame? The biggest surprises of the past two decades — the great financial crisis, the post-pandemic inflation surge, the collapse of Silicon Valley Bank — revealed the limits of prevailing macroeconomic models. Few economists have done more to expose those gaps than Charles Goodhart, who turns 90 in October.

His most famous thing is the law named after him:

when a measure becomes a target, it ceases to be a good measure

(It has like seven other peeps saying similar things, inside and outside of economics.)

"Ignoring that reality makes for elegant models but poor economics."

Goodhart was early to argue that the three-decade tailwind that gave central banks an easy ride — falling inflation, cheap labour and low interest rates — has gone into reverse. Rising pension and healthcare costs will put persistent upward pressure on inflation and real interest rates. High debt ratios compound the problem: many central banks can no longer fight inflation without risking a bout of bond market turbulence.

econ

![](https://m.stacker.news/155934)

> As central banks struggle with the efficacy of their policies, could it be that their models are still to blame? The biggest surprises of the past two decades — the great financial crisis, the post-pandemic inflation surge, the collapse of Silicon Valley Bank — revealed the limits of prevailing macroeconomic models. Few economists have done more to expose those gaps than Charles Goodhart, who turns 90 in October.

His most famous thing is the law named after him:
*when a measure becomes a target, it ceases to be a good measure*

(It has like seven other peeps saying similar things, inside and outside of economics.)

1. **Institutions matter**: banks are just neutral entities passing along monetary policy shocks
2. **Fiscal pressures make CB independence obsolete:** the independence fad lasted 1980-2008, no more
3. **Failures missing from models**: default is a possibility, liquidity is critical
4. **Demography is destiny**: future is pretty fucked, politically/fiscally

## "Ignoring that reality makes for elegant models but poor economics."

![](https://m.stacker.news/155935)

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> Goodhart was early to argue that the three-decade tailwind that gave central banks an easy ride — falling inflation, cheap labour and low interest rates — has gone into reverse. Rising pension and healthcare costs will put persistent upward pressure on inflation and real interest rates. High debt ratios compound the problem: many central banks can no longer fight inflation without risking a bout of bond market turbulence.