In a previous article (December 10, Goodhart’s Law and Monetary Policy) we discussed Goodhart’s Law which says that once an observed empirical relationship begins to be relied upon, it will no longer work. In that article we applied the law to monetary policy. Goodhart’s Law also applies to bank capital regulations.  The Basel Committee on… Read more

California has now had three consecutive months of job gains, and the State’s unemployment rate has been declining, albeit slowly.  That’s an improvement, but it’s not time to break out the bubbly. For one thing, those job gains have been pretty darn small, and they haven’t been enough to drive down the unemployment rate.  Outmigration… Read more

Forecasting is always difficult. It is even more difficult when the data keep changing. This year, we’ve been plagued by very large adjustments to GDP data. Most have been downward adjustments, but a few have been upward adjustments. Productivity has been the source of most of the changes. Jobs data get revised too, but we… Read more

Goodhart’s Law (named after economist Charles Goodhart) says that once an observed empirical relationship begins to be relied upon, it will no longer work.   This law, or a variant, comes up in a lot of fields, but especially finance and economics.  Consider the problem of forecasting the rate of inflation.    Price stability is a major… Read more