Will Artificial Intelligence Replace Computational Economists Any Time Soon?

45 Pages Posted: 7 Oct 2019 Last revised: 2 Dec 2019

See all articles by Lilia Maliar

Lilia Maliar

CUNY The Graduate Center - Department of Economics

Serguei Maliar

Santa Clara University

Pablo Winant

Bank of England

Date Written: September 2019

Abstract

Artificial intelligence (AI) has impressive applications in many fields (speech recognition, computer vision, etc.). This paper demonstrates that AI can be also used to analyze complex and high-dimensional dynamic economic models. We show how to convert three fundamental objects of economic dynamics -- lifetime reward, Bellman equation and Euler equation -- into objective functions suitable for deep learning (DL). We introduce all-in-one integration technique that makes the stochastic gradient unbiased for the constructed objective functions. We show how to use neural networks to deal with multicollinearity and perform model reduction in Krusell and Smith's (1998) model in which decision functions depend on thousands of state variables -- we literally feed distributions into neural networks! In our examples, the DL method was reliable, accurate and linearly scalable. Our ubiquitous Python code, built with Dolo and Google TensorFlow platforms, is designed to accommodate a variety of models and applications.

Keywords: artificial intelligence, Bellman equation, deep learning, Dynamic Models, Dynamic programming, Euler Equation, Machine Learning, neural network, stochastic gradient, value function

Suggested Citation

Maliar, Lilia and Maliar, Serguei and Winant, Pablo, Will Artificial Intelligence Replace Computational Economists Any Time Soon? (September 2019). CEPR Discussion Paper No. DP14024. Available at SSRN: https://ssrn.com/abstract=3464569

Lilia Maliar (Contact Author)

CUNY The Graduate Center - Department of Economics ( email )

365 Fifth Avenue, 5th Floor
New York, NY 10016
United States

Serguei Maliar

Santa Clara University ( email )

500 El Camino Real
Santa Clara, CA 95053
United States

Pablo Winant

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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