Prediction Policy Problems
Jon Kleinberg, Jens Ludwig, Sendhil Mullainathan, Ziad Obermeyer
American Economic Review · 2015 · Volume 105 · Issue 5
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.
Keywords
Econometric Modeling: General, Forecasting Models, Simulation Methods, Search, Learning, Information and Knowledge, Communication, Belief, Unawareness
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