Machine Learning for Economists: An Introduction

Machine Learning (henceforth ML) refers to the set of algorithms and computational methods which enable computers to learn patterns from training data without being explicitly programmed to do so.1 ML uses training data to learn patterns by estimating a mathematical model and making predictions in out of sample based on new or unseen input data. ML has the tremendous capacity to discover complex, flexible and crucially generalisable structure in training data. Conceptually speaking, ML can be thought of as a set of complex function approximation techniques which help us learn the unknown and potentially highly nonlinear mapping between the data and prediction outcomes, outperforming traditional techniques.