Rule of Goodhart’s Law

Beware of politicians bearing quality-of-life targets. However nimble they are in skirting the rule of law, they will find Goodhart’s Law a much tougher proposition. The economist Charles Goodhart formulated it simply: when a measure becomes a target, it ceases to be a good measure. Once success depends on a metric, the effort shifts from improving reality to improving the metric.

That is the challenge facing Robert Abela’s commitment to improve the well-being of Maltese society by 25 per cent during this legislature. The ambition is understandable. The political demand for a better quality of life has become impossible to ignore. Economic growth, employment and disposable income no longer settle the argument. The government has therefore produced a Well-being Index, complete with pillars, indicators and benchmarks intended to measure whether Malta is becoming a better place to live.

But Malta already has good reason to be wary of Goodhart’s Law. It has experienced it already.

In 2005, Professor Ruut Veenhoven’s World Database of Happiness placed Malta first in the world. Four years later Malta again ranked among the best performers in the Happy Planet Index. Neither result corresponded neatly with the political mood of the time. Many voters were deeply dissatisfied with the government. Yet the rankings captured something real. Malta was still benefiting from strong social cohesion, comparatively modest environmental pressures and the sense that the country was moving in the right direction during its first years in the European Union.

The rankings also reflected the questions being asked. Those earlier indices focused heavily on life satisfaction and social cohesion. Later measures incorporated broader assessments of institutional trust, corruption and wider evaluations of public life. Different measures revealed different aspects of the same society.

The same problem appears in the government’s favourite comparison. Abela recently celebrated Malta’s convergence with Sweden on the Human Development Index. The claim is technically correct. The HDI measures income, education and life expectancy. Malta has made remarkable progress on all three.

Yet the HDI tells only part of the story. Once environmental pressures enter the equation, the comparison changes. The United Nations’ Planetary-Pressures Adjusted HDI penalises countries for the environmental costs associated with their development model. Sweden’s position barely changes. Malta’s deteriorates sharply.

Sweden has built prosperity around infrastructure that can sustain it. Malta has relied on a model that extracts ever more from its physical environment. The traditional HDI records the gains; the adjusted version records some of the costs.

The same pattern can be seen in Malta’s trajectory in the World Happiness Report. Between 2017 and 2020 Malta was at 22nd place globally, ahead of France, Spain and Italy. The government treated the result as confirmation that its economic model was succeeding. GDP growth accelerated, employment expanded, and disposable incomes rose.

Malta’s Generation Z now records some of the weakest well-being outcomes in the European Union- Ranier Fasdni

Those rankings captured something real as well. Malta was outperforming its Mediterranean peers on several of the variables measured by the index. Yet they also captured a moment before the model’s costs were sharply felt.

After COVID, Malta’s position began to slide. It eventually fell to 48th place. The decline is often presented as a judgment on the current administration. But the deterioration in environmental quality, pressure on infrastructure and growing dissatisfaction with daily life were not created overnight. They were accumulated over years.

The same development model produced both outcomes. In its early stages it generated genuine improvements in living standards. Later it began to erode the conditions that had made those improvements possible. The environmental deterioration could no longer be justified as the necessary cost of self-improvement. France, Spain and Italy overtook Malta.

The result is a country with sharply uneven outcomes. We rank highly on growth and unemployment. We perform poorly on environmental measures. Malta’s Generation Z now records some of the weakest well-being outcomes in the European Union. The statistics point in opposite directions because they describe different parts of the same reality.

This is the landscape in which the Well-being Index will operate. The sheer number of indicators is intended to produce a more complete picture. It may also create new opportunities for Goodhart’s Law to take hold.

A government committed to increasing well-being by 25 per cent will inevitably confront choices between measures that are difficult and others that are easy. Some interventions require major institutional reform, coordination across ministries and years of political effort. Others produce visible improvements on a dashboard much more quickly.

The risk is that effort will gravitate towards what can be measured most easily. Progress on selected indicators can coexist with stagnation in the conditions that shape everyday life. Statistical well-being may improve while the underlying experience remains unchanged.

That is why the political operation of the system matters as much as the technocratic targets attached to it. Bhutan does not simply aggregate national averages: its framework constrains governments to focus on the most deprived citizens. New Zealand separates current well-being from future well-being and counts them both: gains achieved today are weighed against their long-term consequences.

Malta does not need to replicate either model. But if it works properly, our well-being index should make certain forms of growth more difficult, not easier. It should force governments to account for the trade-offs they would prefer to ignore.

If it fails to do that, the index will become another instrument for demonstrating success rather than testing it. Goodhart’s Law will have done its work long before the target is reached.