Understanding Models and Model Bias with Gaussian Processes

Thomas Cook and Nathan Palmer

No RWP 23-07, Research Working Paper from Federal Reserve Bank of Kansas City

Abstract: Despite growing interest in the use of complex models, such as machine learning (ML) models, for credit underwriting, ML models are difficult to interpret, and it is possible for them to learn relationships that yield de facto discrimination. How can we understand the behavior and potential biases of these models, especially if our access to the underlying model is limited? We argue that counterfactual reasoning is ideal for interpreting model behavior, and that Gaussian processes (GP) can provide approximate counterfactual reasoning while also incorporating uncertainty in the underlying model’s functional form. We illustrate with an exercise in which a simulated lender uses a biased machine model to decide credit terms. Comparing aggregate outcomes does not clearly reveal bias, but with a GP model we can estimate individual counterfactual outcomes. This approach can detect the bias in the lending model even when only a relatively small sample is available. To demonstrate the value of this approach for the more general task of model interpretability, we also show how the GP model’s estimates can be aggregated to recreate the partial density functions for the lending model.

Keywords: models; Gaussian process; model bias (search for similar items in EconPapers)
JEL-codes: C10 C14 C18 C45 (search for similar items in EconPapers)
Pages: 33
Date: 2023-06-15
New Economics Papers: this item is included in nep-big and nep-cmp
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedkrw:97176

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DOI: 10.18651/RWP2023-07

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