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Has Machine Learning Rendered Simple Rules Obsolete?

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  • Jesus Fernandez-Villaverde

    (University of Pennsylvania)

Abstract

Epstein (1995) defended the superiority of simple legal rules over complex, human-designed regulations. Has Epstein’s case for simple rules become obsolete with the arrival of arti?cial intelligence, and in particular machine learning (ML)? Can ML de-liver better algorithmic rules than traditional simple legal rules? This paper argues that the answer to these question is “no.” I will build an argument based on three increasingly more serious barriers that ML faces to develop legal (or quasi-legal) algorithmic rules: data availability, the Lucas’ critique, and incentive compatibility in eliciting information. Thus, the case for simple legal rules is still sound even in a world with ML.

Suggested Citation

  • Jesus Fernandez-Villaverde, 2021. "Has Machine Learning Rendered Simple Rules Obsolete?," PIER Working Paper Archive 21-008, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    • Handle: RePEc:pen:papers:21-008
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    References listed on IDEAS

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    More about this item

    Keywords

    Arti?cial intelligence; machine learning; economics; simple rules;
    All these keywords.

    JEL classification:

    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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