Prediction Policy Problems

2015/05/01 by Jon Kleinberg, Jens Ludwig, Sendhil Mullainathan +1 · 46 citations
Mathematics · Economics, Econometrics and Finance · #Advanced Causal Inference Techniques #Health Systems, Economic Evaluations, Quality of Life #Healthcare Policy and Management

paper · doi:10.1257/aer.p20151023

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.

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