Algorithmic economics and how it might help recovery from Covid-19

AI Economist is a new portal devised by Salesforce to develop ‘ a new line of research that studies how to improve economic design using AI with the goal of optimizing productivity and social equality for everyone‘. Interesting piece in the FT on how the AI Economist can help in the Covid recovery.

Excerpts from the Salesforce interview  with the creators of the AI Economist:

How does the AI Economist work? 

Taxes and subsidies are important tools governments use to reduce inequality and redistribute wealth. However, we still haven’t quite figured out how to implement optimal tax policies for a wide range of social objectives, such as the trade-off between equality and productivity. Economic theory cannot fully model the complexities of the real world, and careful real-world experimentation with taxes is almost impossible. 

Through the AI Economist, we’re bringing reinforcement learning (RL) to tax research for the first time to provide a simulation and data-driven solution to defining optimal taxes for a given socio-economic objective.

The AI Economist uses a collection of AI agents designed to simulate how real people might react to different taxes. In the simulation, each AI agent earns money by collecting and trading resources and building houses. The agents learn to maximize their utility (or happiness) by adjusting their movement, trading, and building behavior. One way to do this is to maximize income while minimizing effort, for example, making as high of an hourly wage as possible.  

Simultaneously, the AI Economist learns to optimize taxes and subsidies to promote global objectives.”

Posted by at 5:35 PM

Labels: Inclusive Growth


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