Has Machine Learning Rendered Simple Rules Obsolete?

19 Pages Posted: 25 Feb 2021

See all articles by Jesús Fernández-Villaverde

Jesús Fernández-Villaverde

University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: January 6, 2021

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 artificial 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.

Keywords: Artificial intelligence, machine learning, economics, simple rules

JEL Classification: D85, H10, H30

Suggested Citation

Fernández-Villaverde, Jesús, Has Machine Learning Rendered Simple Rules Obsolete? (January 6, 2021). PIER Working Paper No. 21-008, Available at SSRN: https://ssrn.com/abstract=3790667 or http://dx.doi.org/10.2139/ssrn.3790667

Jesús Fernández-Villaverde (Contact Author)

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