Prediction Policy Problems
American Economic Review
vol. 105,
no. 5, May 2015
(pp. 491-95)
Abstract
Most 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.Citation
Kleinberg, Jon, Jens Ludwig, Sendhil Mullainathan, and Ziad Obermeyer. 2015. "Prediction Policy Problems." American Economic Review, 105 (5): 491-95. DOI: 10.1257/aer.p20151023Additional Materials
JEL Classification
- C50 Econometric Modeling: General
- C53 Forecasting Models; Simulation Methods
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness