Date:
Location:
This Week's Speaker
Ashesh Rambachan (MIT Economics), "From Predictive Algorithms to Automatic Generation of Anomalies"
Abstract
Economic theories often progress through the discovery of anomalies. Canonical examples of anomalies include the Allais Paradox and the Kahneman-Tversky choice experiments, which are constructed menus of lotteries that highlighted particular flaws in expected utility theory and spurred the development of new theories for decision-making under risk. In this paper, we develop algorithmic procedures to automatically generate such anomalies. Our algorithmic procedures take as inputs an existing theory and data it seeks to explain, and then generate examples on which we would likely observe violations of our existing theory if we were to collect data. As an illustration, we produce anomalies for expected utility theory using simulated lottery choice data from individuals who behave according to cumulative prospect theory. Our procedures recover known anomalies for expected utility theory in behavioral economics and discover novel anomalies based on the probability weighting function. We conduct incentivized experiments to collect choice data on our algorithmically generated anomalies, finding that participants violate expected utility theory at similar rates to the Allais Paradox and Common Ratio Effect. While this illustration is specific, our anomaly generation procedures are general and can be applied in any domain where there exists a formal theory and rich data that the theory seeks to explain.
The Applied Statistics Workshop (Gov 3009) meets all academic year, Wednesdays, 12pm-1:30pm, in CGIS K354. This workshop is a forum for advanced graduate students, faculty, and visiting scholars to present and discuss methodological or empirical work in progress in an interdisciplinary setting. The workshop features a tour of Harvard's statistical innovations and applications with weekly stops in different fields and disciplines and includes occasional presentations by invited speakers.
More information is available at the Gov 3009 website: https://projects.iq.harvard.edu/applied.stats.workshop-gov3009
All interested Harvard affiliates are invited to attend.