Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/202904 
Authors: 
Year of Publication: 
2019
Series/Report no.: 
Upjohn Institute Working Paper No. 19-309
Publisher: 
W.E. Upjohn Institute for Employment Research, Kalamazoo, MI
Abstract: 
Where should better learning technology (such as machine learning or AI) improve decisions? I develop a model of decision-making in which better learning technology is complementary with experimentation. Noisy, inconsistent decision-making introduces quasi-experimental variation into training datasets, which complements learning. The model makes heterogeneous predictions about when machine learning algorithms can improve human biases. These algorithms can remove human biases exhibited in historical training data, but only if the human training decisions are sufficiently noisy; otherwise, the algorithms will codify or exacerbate existing biases. Algorithms need only a small amount of noise to correct biases that cause large productivity distortions. As the amount of noise increases, the machine learning can correct both large and increasingly small productivity distortions. The theoretical conditions necessary to completely eliminate bias are extreme and unlikely to appear in real datasets. The model provides theoretical microfoundations for why learning from biased historical datasets may lead to a decrease (if not a full elimination) of bias, as has been documented in several empirical settings. The model makes heterogeneous predictions about the use of human expertise in machine learning. Expert-labeled training datasets may be suboptimal if experts are insufficiently noisy, as prior research suggests. I discuss implications for regulation, labor markets, and business strategy.
Subjects: 
machine learning
training data
decision algorithm
decision-making
human biases
JEL: 
C44
C45
D80
O31
O33
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
472.88 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.