Research / BFI Working PaperFeb 05, 2024

The Unreasonable Effectiveness of Algorithms

Jens Ludwig, Sendhil Mullainathan, Ashesh Rambachan

We calculate the social return on algorithmic interventions (specifically their Marginal Value of Public Funds) across multiple domains of interest to economists—regulation, criminal justice, medicine, and education. Though these algorithms are different, the results are similar and striking. Each one has an MVPF of infinity: not only does it produce large benefits, it provides a “free lunch.” We do not take these numbers to mean these interventions ought to be necessarily scaled, but rather that much more R&D should be devoted to developing and carefully evaluating algorithmic solutions to policy problems.

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