A mathematical version of this is the method that the researchers apply to complicated questions, says Kaji. In their method, a “generator” creates fake economic data using a model backed by economic theory, and a “discriminator” classifies whether the data are genuine. The competing algorithms, in a method the researchers call an adversarial estimation, establish the parameters needed to make realistic, more-accurate predictions in situations where behavior changes can affect outcomes.
The researchers applied their method to the question of why the elderly spend money at a puzzlingly slow rate. One algorithm looked for features in economic statistics that distinguish the observed behavior of the actual elderly, while the other looked for an economic model that reproduces such statistics to trick its opponent.
The economic model that this cat-and-mouse game generated aligns the complicated incentive structure in a way that mimics the elderly’s actual behavior, which makes it possible to try out different policies in a simulated world and see what happens. The researchers used their model to assess several possible explanations, including that older people don’t know how long they’ll live, want to leave money to heirs, or are concerned with rising medical costs.
The ML-inspired method doesn’t require selecting and using features that might best represent the elderly’s behavior. Instead, the method adaptively learns from data and figures out for itself an optimal set of features. And the researchers find the model’s explanation for why older people spend slowly—that they, even if not rich, want to leave money to their heirs—to be reasonable and plausible. They say their method opens up new possibilities to address deeper and more sophisticated policy questions than was previously feasible.