Causal Economic Machine Learning (CEML): “Human AI”

This paper proposes causal economic machine learning (CEML) as a research agenda that utilizes causal machine learning (CML), built on causal economics (CE) decision theory. Causal economics is better suited for use in machine learning optimization than expected utility theory (EUT) and behavioral economics (BE) based on its central feature of causal coupling (CC), which models decisions as requiring upfront costs, some certain and some uncertain, in anticipation of future uncertain benefits that are linked by causation. This multi-period causal process, incorporating certainty and uncertainty, replaces the single-period lottery outcomes augmented with intertemporal discounting used in EUT and BE, providing a more realistic framework for AI machine learning modeling and real-world application. It is mathematically demonstrated that EUT and BE are constrained versions of CE. With the growing interest in natural experiments in statistics and causal machine learning (CML) across many fields, such as healthcare, economics, and business, there is a large potential opportunity to run AI models on CE foundations and compare results to models based on traditional decision-making models that focus only on rationality, bounded to various degrees. To be most effective, machine learning must mirror human reasoning as closely as possible, an alignment established through CEML, which represents an evolution to truly “human AI”. This paper maps out how the non-linear optimization required for the CEML structural response functions can be accomplished through Sequential Least Squares Programming (SLSQP) and applied to data sets through the S-Learner CML meta-algorithm. Upon this foundation, the next phase of research is to apply CEML to appropriate data sets in various areas of practice where causality and accurate modeling of human behavior are vital, such as precision healthcare, economic policy, and marketing.