Charles Goodhart, William Claude Dukenfield and Donald Thomas Campbell are three quite different people. Goodhart, born in 1963, is an economist professor emeritus at the London School of Economics. Dukenfield, 1880-1949, better known as W.C. Fields, was an American comedian, actor, juggler and writer. Campbell, 1916-1996, was an American social scientist. What do they have in common? And why do I think that they have some special relevance for development and particularly for what is called ‘managing for results’? It all comes down to the three ‘laws’ named after the three gentlemen.
Let’s start with Goodhart’s law. It’s original formulation (taken from Wikipedia) was
Any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes.
Today, it’s most popular formulation (coined by Marilyn Strathern, a British anthropologist) is:
When a measure becomes a target, it ceases to be a good measure.
Goodhart’s law tells us for example that when a project’s target is to increase income for a number of poor people, then measure of success for a project should not – or not alone – be the target people’s income.
The reason for this can be explained through Dukenfield and Campbell’s laws.
Dukenfield’s law of incentive management
Dukenfield’s Law of Incentive Management was proposed as such by Mark Kleiman in the Atlantic Magazine. In it’s original wording (written in You Can’t Cheat an Honest Man), it states:
If a thing is worth winning, it’s worth cheating for.
Kleinman proposes the following general formulation for the law:
Any incentive to create a result also creates an incentive to simulate the same result.
Kleinman proposes two corollaries:
One: the greater the incentive, the greater the temptation.
Two: holding the level of audit effort constant and other things equal, the reliability of a measure will decline as the importance attached to it grows.
Translated into the world of development, this means that if we define for example increased income as the successful result of a project and incentivize the achievement of this result, then there is an temptation to take short-cuts to achieve the results, even if only at the time when it is being measured.
Going back to Goodhart, it becomes clear that measure and result need to be separated. While it is indeed an important result of a development project to increase the income of poor people, the measure of success should actually be on a deeper level in terms of achievement, e.g. the sustainability of this change or deeper systemic change that lead to higher income.
Campbell takes the same logic into the realms of decision-making (again from Wikipedia):
The more any quantitative social indicator (or even some qualitative indicator) is used for social decision-making, the more subject it will be to corruption pressures and the more apt it will be to distort and corrupt the social processes it is intended to monitor.
This basically says that if the achievement of a result is used for decision-making, e.g. whether a project contract is extended, then there is a tendency to specifically work to achieve this particular result, even if a shift in strategy would be better to achieve the overall goal of a project.
So in conclusion, if a measure becomes a target, then there is an incentive for people to either cheat to achieve it or to adapt their strategy to achieving this particular result even if the achievement of the overall development goal would require a change in strategy.
This closely links to the following quote from the New Scientist (12th April 2011, pp 40-43):
The facts are absolutely clear. There is no question that in virtually all circumstances in which people are doing things in order to get rewards, extrinsic tangible rewards undermine intrinsic motivation.
Hence, we have to rethink how we treat and measure results, how we motivate project staff and how we finance projects. The currently fancy idea to pay organisations by the results they achieve seems in the light of the above cited laws a pretty bad idea.