en.wikipedia.org/wiki/Goodhart%27s_law
2 corrections found
rational expectations, an economic theory that those aware of a system of rewards and punishments will optimize their actions within that system to achieve their desired results.
This misdefines rational expectations. In economics, rational expectations is about how people form expectations about future variables using available information, not a general theory that people optimize behavior within reward-and-punishment systems.
Full reasoning
This sentence gives the wrong definition of rational expectations.
Rational expectations is a hypothesis about expectation formation: agents' forecasts of future economic variables are formed using available information in a way that is broadly consistent with the economic model. It is not the theory that people who know a reward structure will optimize their behavior within it. That latter idea is closer to general incentive-based behavior or rational choice, not the specific meaning of rational expectations in macroeconomics.
Two authoritative sources contradict the article's definition:
- The Nobel Prize background for Robert Lucas says rational expectations means agents' expectations are "truly forward-looking" and that agents "use available information in the best way." It describes the hypothesis as applying rational behavior to expectation formation under uncertainty.
- The Federal Reserve Board says the baseline rational-expectations assumption is that "private agents use a fixed and known model of the economy to process all relevant information."
So the article's wording is not just simplified; it substitutes a different concept for the actual definition of rational expectations.
2 sources
- Advanced information - The Scientific Contributions of Robert E. Lucas, Jr. - NobelPrize.org
Rational expectations are instead truly forward-looking... The rational expectations hypothesis is best described as the consistent application of the hypothesis of rational behavior to individuals' and firms' behavior in genuinely dynamic situations... it simply means that agents use available information in the best way.
- Monetary Policy and Uncertainty - Federal Reserve Board
The baseline assumption used in much research is that expectations are rational, in the sense that private agents use a fixed and known model of the economy to process all relevant information.
The No Child Left Behind Act passed by the United States Congress often led to teachers forcing students through grades before they were ready, to ensure funding for their school for the foreseeable future.
This gets NCLB backwards. NCLB-era accountability is widely documented as reducing social promotion and increasing grade retention, and the law’s official sanctions were based on Adequate Yearly Progress—not on promoting students to preserve future funding.
Full reasoning
This example misstates both the direction of the policy effect and the mechanism.
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Research on the NCLB era reports less social promotion, not more.
A peer-reviewed study in the Journal of Educational Psychology states that, under high-stakes testing and the accountability policies that culminated in NCLB, there is "little doubt" one consequence was "a decrease in the frequency of social promotion ... and an increase in grade retention." That is the opposite of the article's claim that NCLB often forced students through grades before they were ready. -
The law's accountability structure was based on AYP sanctions, not on advancing unprepared students to protect funding.
The U.S. Department of Education's own NCLB reference explains that schools failing to make Adequate Yearly Progress (AYP) faced escalating sanctions, including school improvement status, transfer options, supplemental services, and ultimately restructuring. That is an accountability-and-sanctions framework tied to test performance and school status—not a funding rule that depended on socially promoting students to the next grade.
So the article's example reverses the better-documented pattern of NCLB-era policy effects and attributes to the law a funding mechanism it did not use in that way.
2 sources
- Effect of Retention in First Grade on Children's Achievement Trajectories Over 4 Years: A Piecewise Growth Analysis Using Propensity Score Matching
Although the effectiveness of these educational accountability policies is hotly disputed ... there is little doubt that one consequence of the use of high-stakes testing is a decrease in the frequency of social promotion ... and an increase in grade retention.
- Archived Information: No Child Left Behind: A Desktop Reference
Schools that do not make adequate yearly progress will be identified for increasingly rigorous sanctions ... students in low-performing schools will have the option to transfer to other public schools or to obtain supplemental educational services. Finally, the law mandates the fundamental restructuring of any school that fails to improve over an extended period of time.