Prediction Policy Problems
- (pp. 491-95)
AbstractMost empirical policy work focuses on causal inference. We argue an important class of policy problems does not require causal inference but instead requires predictive inference. Solving these "prediction policy problems" requires more than simple regression techniques, since these are tuned to generating unbiased estimates of coefficients rather than minimizing prediction error. We argue that new developments in the field of "machine learning" are particularly useful for addressing these prediction problems. We use an example from health policy to illustrate the large potential social welfare gains from improved prediction.
Citation2015. "Prediction Policy Problems." American Economic Review, 105 (5): 491-95. DOI: 10.1257/aer.p20151023
- C50 Econometric Modeling: General
- C53 Forecasting Models; Simulation Methods
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness