When measures like CPI and GDP become policy targets, they also become sources of confusion for both experts and the public.

When Henry Hazlitt wrote in Economics In One Lesson that “Economics is haunted by more fallacies than any other study known to man” he knew what he was talking about. Economic fallacies abound — and are even popular. What’s worse, economic illiteracy seems to only increase. In part, this is due to economists trying too hard to be scientific and help policymakers engineer the economy.

Many consider the well-known words of Lord Kelvin obvious, that “when you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind.” That sentiment has been taken to heart by many in the sciences, both natural and social, and also in economics. 

After all, without the ability and use of mathematics and statistical data analysis, science would not be able to contribute much knowledge at all. Yet there are limits to the usefulness of measures, as Goodhart’s Law suggests: “When a measure becomes a target, it ceases to be a good measure.”

It is actually even worse in economics, where the use of measures can arguably be a cause of widespread economic illiteracy.

...read more at thedailyeconomy.org