Optimal Use of Preferences in Artificial Intelligence Algorithms / Joshua S. Gans.

Format:

Book

Author/Creator:

Gans, Joshua S.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w34780.

NBER working paper series no. w34780

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2026.

Summary:

Machine learning systems embed preferences either in training losses or through post-processing of calibrated predictions. Applying information design methods from Strack and Yang (2024), this paper provides decision-problem-agnostic conditions under which separation--training preference-free and applying preferences ex post is optimal. Unlike prior work that requires specifying downstream objectives, the welfare results here apply uniformly across decision problems. The key primitive is a diminishing-value-of-information condition: relative to a fixed (normalised) preference-free loss, preference embedding makes informativeness less valuable at the margin, inducing a mean-preserving contraction of learned posteriors. Because the value of information is convex in beliefs, preference-free training weakly dominates for any expected-utility decision problem. This provides theoretical foundations for modular AI pipelines that learn calibrated probabilities and implement asymmetric costs through downstream decision rules. However, separation requires users to implement optimal decision rules. When cognitive constraints bind--as documented in human-AI decision-making--preference embedding can dominate by automating threshold computation. These results provide design guidance: preserve optionality through postprocessing when objectives may shift; embed preferences when decision-stage frictions dominate.

Notes:

January 2026.

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