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An AI can simulate an economy millions of times to create fairer tax policy

159 points by asamant 6y ago

andrew3019 6y ago
> was 16% fairer than a state-of-the-art progressive tax framework studied by academic economists. I wonder how fairness was measured.
grillermo 6y ago
With the little tiny weeny omission of debt from the model. “The economy”
- deleted 6y ago
  [deleted]
- clavalle 6y ago
  And spending resources to maintain existence.
adolph 6y ago
The article seems link free but the below seem to be related to the project. https://blog.einstein.ai/the-ai-economist/ https://blog.einstein.ai/the-ai-economist/ https://einstein.ai/the-ai-economist https://einstein.ai/the-ai-economist https://github.com/salesforce/ai-economist https://github.com/salesforce/ai-economist [edit: Sarcasm removed. I think the project is exciting. I don't think the stated value of data/ML being fairer than politics is very strong because (a.) politics is reflective of culture and represents a sophisticated method of developing consensus among many different ideas of what fair means, (b.) tax accounting work will just shift to GAN and the end result won't be much different just more complex.] GAN https://en.wikipedia.org/wiki/Generative_adversarial_network https://en.wikipedia.org/wiki/Generative_adversarial_network
- Proven 6y ago
  > Income inequality is one of the overarching problems of economics. Ridiculous! If that really needs to be solved I propose to learn from North Korea - they solved it without an AI. You don't need GPUs for that.
Proven 6y ago
That assertion is beyond laughable. First, I don't need an AI to know that all government departments except possibly Justice should be terminated. Secondly, this "AI can help" nonsense is nothing else but a script that outputs thoughts of computerized central planners and Keynesian/socialist intellectuals. And FA Hayek explained why that can never work. https://www.econlib.org/library/Essays/hykKnw.html https://www.econlib.org/library/Essays/hykKnw.html But going back to the previous point, how stupid would one have to be to not know that the optimal tax rate is 0? At that tax rate there's zero budget waste and up to 100% of one's income can be spent on "fair" causes.
0d311 6y ago
At the end of the article they say they’re releasing the source code, does anyone know where?
- adolph 6y ago
  I think it may be this: https://github.com/salesforce/ai-economist https://github.com/salesforce/ai-economist Foundation is a flexible, modular, and composable framework to model socio-economic behaviors and dynamics with both agents and governments. This framework can be used in conjunction with reinforcement learning to learn optimal economic policies, as done by the AI Economist (https://www.einstein.ai/the-ai-economist https://www.einstein.ai/the-ai-economist).
gilrain 6y ago
The problem is not that we don't know how to create a fair tax policy. The problem is that the unfair winners under current policy spend their wealth to prevent one from being implemented. It's a human greed problem; an AI cannot help us with that. This AI's advice world either be ignored, or its algorithms corrupted before it began.
- adrianN 6y ago
  I think you underestimate the complexity of tax policy. There are problems even with the definition of "fair".
- leetcrew 6y ago
  > The problem is not that we don't know how to create a fair tax policy. I would say this is a big chunk of the problem. people don't actually agree on what "fair" means. depending on who you ask, "fair" might mean anything between "I get to keep most of what I earn" and "everyone gets equal access to resources". regardless of what "fair" means to you, you still need to understand tax incidence (who actually bears the burden of a particular tax) to devise policies that achieve your goal. tax incidence can be a very controversial topic.
- pc86 6y ago
  What is a fair tax policy, then? Because the vast majority of tax policy debates I've seen are trying to craft a fair policy. Even folks I disagree with vehemently are generally interested in fairness.
  - mistermann 6y ago
    > Even folks I disagree with vehemently are generally interested in fairness. I tend to think this is the case as well...it seems that, if you can manage to get people into a proper state of mind, or carefully phrase questions to avoid triggering heuristics in the subconscious mind, in my experience "most" people have fairly substantial intuitions of compassion, group solidarity, a desire to do the right thing, and all sorts of other good stuff. > What is a fair tax policy, then? Because the vast majority of tax policy debates I've seen are trying to craft a fair policy. I wonder if a substantial part of the problem might be that the mental concept of "fairness" is inherently and extremely subjective - if we were somehow able to view the source code of the mind, I suspect each individual's implementation of FairnessCoefficient() for any given subject would involve an absolutely massive number of variables, some that would seem to have no obvious relevance to the matter, and the code would be utterly riddled with bugs. I estimate this to be the case based on observations of how people discuss ideas, and how their minds will produce different (and logically inconsistent) answers to the same question by making very simple changes to the variables you ask them to consider when asking a question - or, even using the exact same variables, but changing the wording of the question. Another part of the problem of developing "fair" tax policy is linguistic: what does this word "fair"[1] mean? Like really mean, in the real world, the aggregate of all people's opinions? How might we know such a thing? Tax policy debates is one approach, but how accurate/optimal are the calculations these policies produce? Do they take into consideration the psychological impact it will have in a population, which in turn drives their behavior in a wide variety of ways (including voting), which in turn drives the real world success of the recommended policies? And, even if one assumes that these think tanks are producing fairly optimal (for the real world) recommendations, to what degree are they implemented consistent with their design? And where incomplete implementations occur (approximately always I would estimate), what are the downstream consequences of that - how far do the real world results skew from the model estimates when ~random changes are injected, or portions left out? How would we know the answers to such questions? How many people realize (like, really realize) how important these unknowns are? How many people actually think this level of detail is even worth acknowledging, let alone devoting some reasonable amount of effort into exploring? Perhaps some golden knowledge is located not too far below the surface? But how how would we know, if we don't even look? [2] I have no idea how, but it can easily be observed that most people seem to hold the belief that we do know such things (which is kind of interesting, if you think about it for a while.) Regarding fairness being inherently subjective (a matter of opinion), and the obvious folly in outsourcing calculations to academics (and ultimately politicians) rather than letting those whose lives are effected decide, people often remark that "people aren't smart enough" to properly assess what is "fair". I think there's actually a lot of truth to this. But then, if one was to study a feral child, you might discover that they do not have the ability to do many things that we take for granted, like perform the most basic of mathematical operations. Similarly, if you rewind time sufficiently, you can also find a point where even the brightest minds on the planet were unable to design a machine that can transport people through the air. This suggests that human beings have a unique characteristic compared to other mammals: the ability to learn and understand very complex multivariate ideas, as well as the ability to pass this knowledge down to subsequent generations. Considering this, just as we discovered a way to consistently teach people how to perform mathematics (and some other things), might there also be a way to teach people to at least somewhat skilfully consider the complexities involved in economics? But even if we did achieve that, there's still a problem in determining the aggregate of all people's opinions on the notion of economic fairness...how do we collect those opinions for analysis? As far as I can tell, this is widely considered to be a "solved problem" via two means: a) Democratic elections b) Public opinion surveys. My suspicion though, is that these two approaches may not actually be as optimal as we believe, in that several shortcomings should be fairly obvious with the mildest of examination. Despite this, it seems like these shortcomings are not considered noteworthy enough to do something about. Or, perhaps people don't actually consider ideas such as this, at all. This structural/epistemic shortcoming (and the substantial unawareness of it) in our society seems to be not only limited to the topic of economic fairness. For example, I often read online (the news, forum discussions, serious academic papers, etc) assertions of the form "People believe <X>" - or even more generally, "<X> <Y> <Z>", where the values of X,Y,Z can be near anything describing the real world, and people seem to typically label these assertions as "the facts". A bit of problem with this system though, is that most people seem to not realize (and very often seem to have a very strong aversion to realizing, or even discussing) is that most of these things that we have categorized as facts, are nothing of the kind. Rather, they are estimates. Some of them are surely fairly accurate, and many of them are likely amazingly inaccurate (even backwards, the opposite of what is true)...but what they aren't, is "facts". And yet, we seem to believe the opposite of this (that they are facts), and we then act upon these false beliefs, and then proceed to complain endlessly online that "things suck", and attribute it to <x>, or <-x> (say, political parties), typically inline with other beliefs, which are also not true. I wonder what a disinterested alien from another planet might think about the human species. Here we have these people who are able to achieve the most wondrous technological things, like splitting the atom, for example - and then with this knowledge, proceed to use it to design a weapon that can be dropped on other members of their species who live in far away lands, who happen to have different ideas than them (or something like that, the true causation may not be well understood). They have the ability and the drive to see and understand the form of matter down to the quantum level, spending many of billions in the process, with no particular real world application in mind for this knowledge, but then simultaneously seem unwilling (perhaps, unable) to provide basic food and shelter for a substantial number of their species, or devote any widespread, serious/skilful mental energy into that arguably far more "important" problem (and this is just one example, there are many others). They have the infinite curiosity required to develop technology that can see deep into the subatomic level of material reality, or light years into outer space - things that are at best mildly interesting to most people - yet simultaneously seem to have very little curiosity (if not an outright refusal) for attempting to understand that which causes widespread material discomfort (at home or abroad), things that have been complained about in widespread abundance, for centuries. They have seemingly endless energy and time for complaining about certain aspects of reality, but little time or curiosity for what actually causes it.[3] What a curious species, these humans. [1] https://www.merriam-webster.com/dictionary/fair https://www.merriam-webster.com/dictionary/fair [2] https://en.wikipedia.org/wiki/Streetlight_effect https://en.wikipedia.org/wiki/Streetlight_effect [3] http://media.moronail.net/images/stories/dg_pictures/0905/1392.jpg http://media.moronail.net/images/stories/dg_pictures/0905/13...
LatteLazy 6y ago
It can't do shit until you have a computable definition of "fair"
- kortex 6y ago
  > In economics, the Gini coefficient is a measure of statistical dispersion intended to represent the income inequality or wealth inequality within a nation or any other group of people. I'm guessing this is their metric. https://en.m.wikipedia.org/wiki/Gini_coefficient https://en.m.wikipedia.org/wiki/Gini_coefficient
  - jstanley 6y ago
    You can fix all wealth and income inequality with a simple 100% tax on everything, but that doesn't make it fair.
  - LatteLazy 6y ago
    Gini just measures inequality doesn't it? So a perfect Gini coefficient would be quickly achieved with a 100% tax on all wealth and income. I'm not sure I'd say that was fair or a preferable way to live though...
- at_a_remove 6y ago
  Indeed. Some view fairness as "I worked more, therefore I deserve more" and some view fairness as I should get the same as everyone else, regardless.
- clavalle 6y ago
  I think a better metric would be net value creation. There are two times to care about inequality: When the low-end creates physical suffering and when the high end controls enough they can force the low end into suffering. But, between those markers there's a /lot/ of room to maneuver. I really feel like the term inequality is a simple placeholder for a more complex idea that has morphed into it's own, mis-aimed, creature.
- driverdan 6y ago
  It also assumes that "fair" is the desirable outcome.
blippage 6y ago
As the saying goes: To err is human, but to really foul things up you need a computer. -- Paul R. Ehrlich
- tboyd47 6y ago
  I've come to believe the most dangerous thing in the world is an expert with a computer model.
  - mtgx 6y ago
    Yes, this is the real danger of "AI" - ignorant people using it to control society thinking the AI is the "best" at everything and fair, not that the AI will become "self-aware" and destroy us. Humans that control very powerful "AI" are much more dangerous, especially when they wrongly believe the AI's algorithms are flawless or even "much better than a human"(which a lot of people do when they get caught up in the AI hype).
  - pjmorris 6y ago
    Maybe. I'm more worried about hundreds of thousands of amateurs with computer models (Excel spreadsheets.)
    - tboyd47 6y ago
      I'd actually be more okay with that because their models don't influence policy.
      - pjmorris 6y ago
        I don't see it that way; The aggregate effects of cost optimization by amateurs with spreadsheets at 100 F500 companies, 1000 mid-sized firms, 10,000 cites, 100,000 small firms has got to look a lot like policy.
Verdex 6y ago
From the article: "In the simulation, four AI workers are each controlled by their own reinforcement-learning models. They interact with a two-dimensional world, gathering wood and stone and either trading these resources with others or using them to build houses, which earns them money. The workers have different levels of skill, which leads them to specialize." So I'm sure they can create a fairer tax policy ... as long as our world is equivalent to a simplified version of age of empires. This is just someone's hobby that they somehow convinced other people was serious work.
- HenryKissinger 6y ago
  > So I'm sure they can create a fairer tax policy ... as long as our world is equivalent to a simplified version of age of empires. Greetin. Correctus? Estorer.
umvi 6y ago
We can't even agree on what "fair" means. Setting aside tax avoidance, which is a different issue, people are upset Trump didn't have to pay taxes on years his businesses had massive losses. Many people think fair means "if you are rich, you should have to pay a large amount of taxes every year no matter what". But actually, you can be rich and bleeding money left and right. If you had negative annual income, even if you are rich, I don't think the government should also get in on the action and bleed you some more just because you have money. Tax money when it changes hands.
- blippage 6y ago
  As one hedge fund manager put it: what exactly is "fair" anyway, and how will you know when you've attained it?
- vmception 6y ago
  Exactly, governments are incentivizing transactions: “if you borrow and spend in the real economy then it offsets what you pay us, here are a few perks to help that along.” People also dont seem to understand that a limited partnership can borrow other people’s money, have overhead costs and also pay you a salary+distributions, but the partnership tax returns passes all the overhead costs to your personal tax return showing a big “loss” while not showing you personally made money that year because the losses naturally eclipse that. You can still buy a mansion in all cash and not be in debt and not have anything to pay governments. Doesn't take an army of accountants and lawyers to understand that. Well, except for the people that think they need an army of accountants and lawyers to form a Limited Partnership.
- rtkwe 6y ago
  It's partially that everything about the man feels like a fishy facade and that the combination of running everything as a pass through but also having business bankruptcies. There's also the question of stories like [0] where there are huge loses claimed that on closer examination seem dubious and are later banned. I think it's the mixing of personal and 'business' finances that really muddle the waters here and that the twin facts of him being 'rich' and 'losing gobs of money for decades' feels unfair. [0] https://www.seattletimes.com/nation-world/trump-lawyers-advised-him-that-irs-might-call-tax-dodge-improper/ https://www.seattletimes.com/nation-world/trump-lawyers-advi...
notahacker 6y ago
> In the simulation, four AI workers are each controlled by their own reinforcement-learning models. They interact with a two-dimensional world, gathering wood and stone and either trading these resources with others or using them to build houses, which earns them money. The workers have different levels of skill, which leads them to specialize. Lower-skilled workers learn they do better if they gather resources, and higher-skilled ones learn they do better if they buy resources to build houses. So basically they're tackling one of the hardest macroeconomic problems with a simple and completely abstract microeconomic model which sounds less like cutting edge AI and more like a fusion of iterated prisoner dilemma models and the Edgeworth box. > the AI’s policy cobbled together aspects of both, applying the highest tax rates to rich and poor Sounds like they've overfitted to the model's assumptions so much their agents are choosing to not be poor primarily to reduce their tax bill...
- yowlingcat 6y ago
  How did I know that this would be the result from the headline? It's just like the old saying. Garbage in, garbage out.
  - rrobukef 6y ago
    An important distinction: publishable garbage! Luckily, there is now a baseline, the next person can only publish improvements. Maybe one day we reach Hari Seldon levels of AI.
- Cthulhu_ 6y ago
  Yeah, it sounds more like they're training an AI for resource management games (like idk, Dwarf Fortress and co?)
- Serious_Cheese 6y ago
  The headline is misleading (click-bait). Reading the headline, I imagined they have simulated the entire economy of the world and have used reinforcement learning to find optimal policies, but they only simulated 4 workers and are making generalization to the entire economy.
woile 6y ago
If I understood correctly "Good economics for hard times", this statement is not correct: > taxing people too much can discourage them from working or motivate them to find ways to avoid paying—which reduces the overall pot. What's the evidence baking that claim?
- goatinaboat 6y ago
  What's the evidence baking that claim? This is called the Laffer Curve https://en.wikipedia.org/wiki/Laffer_curve https://en.wikipedia.org/wiki/Laffer_curve
  - MereInterest 6y ago
    And again, where is the evidence for this claim? I've gone through the last 50 years of US tax cuts, and every time the taxes are cut, revenue decreases. The Laffer Curve may be an interesting theoretical model, but using it to influence any policy decision is laffable.
    - wavefunction 6y ago
      As you point out the effects proposed by the Laffer curve have never been observed in the real world and instead the opposite has been true. It's an article of faith among many American conservatives though and faith cannot be overcome by facts.
      - pc86 6y ago
        This seems unnecessarily dismissive. It sounds like you're arguing the Laffer curve doesn't exist, which is a pretty bold claim not backed up by scholarship. This is a very different claim than "the US is on the left side of the curve" which even a lot of conservatives agree with. If you're arguing against the existence of the curve, it would mean that a marginal increase from 99% to 100% would increase revenue which seems unlikely.
        6y ago
blippage 6y ago
Here's the wisest economic saying I have ever heard: governments should run the economy like a housewife runs her household budget. That was Margaret Thatcher. The second-most insightful saying on economics I have ever heard: The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design. -- Friedrich August von Hayek Forget the AI, forget the experts, forget the professors with their PhDs in economics. They're all just guessers, making guesses that are as likely to be wrong as they are to be right. Got that?
- admax88q 6y ago
  I strongly disagree with running the government like a household budget. It seems like a nice simple reduction but they're very different things. Corporations don't run as household budgets, neither should governments. Two main differences, growth and taxation. Growth means that economically you can outspend your "budget" every year and still come out ahead because that spend this year makes next year's budget larger. Taxation means your can spend money on any one initiative and if it increases economic activity in any way you can make it back via unrelated taxes without increasing any tax rates or fees. Households have neither of these options.
  - luckylion 6y ago
    A household could also just spend money hoping to increase next year's income (because you bought a bigger car or a new suit/dress). If that works, you'll also "come out ahead". But it usually doesn't, I guess. For taxation, you might consider stock market investments a similar thing "oh sure, I spend money here, but by doing so I stimulate the economy and I get dividends from my shares". Of course, they can't just declare themselves shareholders of other companies and send in the cops to collect money, that's a state-level privilege.
  - winstonewert 6y ago
    It seems to me that its not really that different from a household. A household can also end up ahead if it outspends in ways that contribute to future growth. In fact, most people do to get an education, buy a house, etc. It seems to me that it's not a really question of whether or not its a household, its whether the spending actually contributes to growth. Fundamentally, that depends on how its spent. If you spend the money bombing countries in the middle east, probably not.
fizixer 6y ago
> AI ... simulate ... Wow, so now the whole of CSE (computational science and engineering) is AI. Great, I can call myself AI researcher.
pjmorris 6y ago
FTA > “It would be amazing to make tax policy less political and more data driven,” Seems like an ...optimistic... viewpoint. IMO, the model, the data, and the notion of fairness are all political. > "the result appears counterintuitive and not something that a human might have devised." Will a legislator be willing to enact a policy that doesn't meet their intuitions?
- remram 6y ago
  I don't know, that seems to match real-world policies, where there are unemployment aids but they're usually contingent on you being employed some of the time (e.g. runs out if you haven't been employed in X months).
  - pjmorris 6y ago
    Perhaps the specific example policy seems intuitive to some. I'm wondering about the general case. There's a problem of interpretability in AI models, it seems like there's also a related problem in terms of how to make decisions based on uninterpretable (unintuitive) models.
    - remram 6y ago
      Yes, and there's also the possibility of over-fitting, finding a local minimum, or the population size being too small...
- maerF0x0 6y ago
  > fairness are all political Exactly. I came to say exactly that. Think a hypothetical of when you're a child and your mom has to decide how many cookies your mom gives you and your brother: * Should mom give you equal cookies? * Or should she your brother 2x the cookies because you're 5 and he's 15 and has 2x the caloric needs? * Or should she give you 10x the cookies because he's had so many cookies in his life and you've had comparatively so few? * Or should he give you more cookies because you're 1/2 his weight and we want to equalize those. * Or maybe she should give you less cookies because you're fat for your age and he's not. * Or maybe she should give you more cookies because you like them more than he does and would get more out of them. * Or maybe she should give you chips because you're allergic to the chocolate in cookies and it would kill you. But what's the right chips to cookies ratio that is fair? And what if your brother also wants chips too, but we only have so many cookies and so many chips and him eating chips means less for you and he can eat cookies, so why should he get chips? But if you're getting 10 chips, and he's getting 0, how is that fair? WTF is "fair"?
baron_harkonnen 6y ago
I highly recommend Jeffrey Winters' book "Oligarchy" to understand tax policy. Though an academic book Oligarchy is very easy to read and surprisingly neutral politically. Winters basically says that oligarchy is when a particular economic group has asymmetric power in a society, arguing that the main use of the power is wealth defense. He then outlines how this has four major forms: - Warring oligarchies where warlords fight each other to protect wealth - Ruling oligarchies similar to Italian city states - Sultanistic oligarchies were multiple oligarchs align to support a single oligarchical ruler - Civil oligarchies which are basically like the US and Singapore where oligarchs mostly use tax law and investment strategies for wealth defense. The main evolution between these oligarchies is how much energy needs to be expended in wealth defense, the earlier stages requires constant violence against both the lower class and competing oligarchs, evolving to more cooperation between oligarchs and finally when the wealth class agree to the civil law so long as it can still defend its wealth. In the case of civil oligarchy, Winters argues that nearly all of wealth defense and manipulation of the law is basically around tax codes and loop holes that allow wealth defense. The oligarchs in general are fine surrendering their military power (which is expensive anyway) so long as they can still defend their wealth. They agree to adhere to the rule of law, so long as the rule of law doesn't impact their ability to maintain wealth. The conclusion of course being that we will always have complex tax law because it is required by the ruling oligarchy.
- barbarbar 6y ago
  Thank you for this very useful summary.
- germinalphrase 6y ago
  I would be curious to understand how a flat tax would interact with this premise.
  - notahacker 6y ago
    It's an alternative strategy for oligarchies to defend their wealth
webel0 6y ago
This sounds rather similar to a lot of the work being done in macro/public finance right now. If you look at a model from someone like Mendoza you’ll see that they have several parts of the economy characterized as recursive optimization problems + various constraints. As others have pointed out, however, it is quite difficult to interpret these model results. The best you can do oftentimes is argue for why your setup makes sense then provide some intuition for what is going on. The problem is that slightly tweaked models are capable of delivering qualitatively divergent results. I do think that reinforcement learning brings to the table some novel techniques for solving models with larger state spaces, though.
captainzidgel 6y ago
"Father, why are we only allowed 2 portions of stew a day?" "Hush, my child. Econatron 1.3 Nightly 20310201 dictates it. It sees all. It knows all."
ilaksh 6y ago
Haven't we known for years which parts of the tax policy are outdated and unfair? (All of them).
zadkey 6y ago
It could for sure. But that assumes it is set up correctly. And even if it is setup correctly and runs realistic simulations, there are often in real life unforeseen variables like hurricanes, earthquakes, new discoveries, etc. But how we define what is a fair tax policy is incredibly important. If the goal is not well defined how can an AI reach it? What about other economic factors. What if a fair tax policy is not complete or possible without some other economic element(s) as a counterpart. What if a fair tax policy could only exist when Universal Basic Income is established. But let's say that somehow magically all unexpected circumstances are accounted for. And the AI does successfully create a fair tax policy. There will be those whose stand to loose a large amount under a fair tax policy. They are few, but they are powerful and wield massive influence over government. Would they go along with such a policy? It doesn't seem likely. It seems like even If you get a fair tax policy that is created, there will be people honestly questioning it's validity and people who are against regardless of how valid the result is. It just seems unlikely to succeed. It may be useful economists might dissect what result it gives hoping to find new insights. But beyond that, I'm not sure how much good would realistically come from it.
- varispeed 6y ago
  Something like "fair" tax policy is impossible because the world isn't fair. It's like trying to find mathematical formula to make 2 x 2 equal 5. Anyone trying to shape tax policy is biased one way or another and is causing detachment from effort and reward which is extremely demotivating. It looks innocent on a spreadsheet, but tell someone who worked hard all their life that now they need to part with half of their salary to fund some vanity projects meanwhile they neighbour gets paid for watching telly all day.
  - Nasrudith 6y ago
    In my opinion the fairness of the world is irrelevant as no matter what search space of possible and impossible combinations and get you will never find universal consensus on what qualifies as "fair" making the asking futile. Is a world where any form of violence is literally impossible unfair to others in worlds wracked by it or who desire it consensually?
tharne 6y ago
Opaque and complex models used to dictate economic policy. What could go wrong? I know Trump and Covid suck a lot of oxygen out of the room, but heck, 2008 wasn't all that long ago. Remember when a bunch of sophisticated models told us that a mass default on U.S. mortgages was statistically impossible? Taxes are about tradeoffs, not fairness. You're talking money from people under the threat of jail, there's no fairness there, only a weighing of individual rights vs. the needs of the many. Every tax policy is a compromise of some sort with varying degrees of winners and losers. This is a political problem not a technical one.
varispeed 6y ago
Someone should read some of Richard Thaler's works. In other words you cannot simulate population's irrational behaviour. The fact that someone wants to take other person fruits of work and redistribute them using arbitrary rules, means anything but fair.
- maerF0x0 6y ago
  Any specific recommendation?
  - varispeed 6y ago
    I would recommend reading "Misbehaving" that talks about economy and people behaviour. It is quite an eye opener.
hnracer 6y ago
Simulation has been used extensively by economists going back decades. One example is the Dynamic Stochastic General Equilibrium model. Often the output is determined and easily predicted by the input assumptions and the results you get back aren't surprising given an understanding of those assumptions as well as the process that generates the output. Quite often it's a case of garbage in garbage out. Worse yet is when the results are spun as a finding/discovery in the empirical sense when in reality it's very common for researchers to fudge the inputs in order to get an output that is coherent and aligns with both common sense and extant theory. Simulation (Monte Carlo) is much more reliable in financial product research since the market does seem to obey some stable distributional dynamics, and the consequences on product pricing are well understood.
mchisto 6y ago
An AI youtuber who explains papers has covered it: https://www.youtube.com/watch?v=F5aaXrIMWyU https://www.youtube.com/watch?v=F5aaXrIMWyU Highly recommend.
currymj 6y ago
it’s very cool work; i wish we could ban the use of “AI” as a noun. it only ever confuses people.
saynototaxation 6y ago
Taxation is theft, because no one is allowed to take my property without my permission. By paying taxes you support theft!
Mupuff 6y ago
The issue is that the bottleneck is not coming up with the solution - but actually getting the political capital to pass it.
GoodJokes 6y ago
We don’t need AI to create a fair tax policy. We need political will.
syntaxing 6y ago
I know there's a lot of nuances in this, but I really with the US would head towards computer driven policies (with judiciary oversight). Think of it as Census v2.0. There's so many things that should not have human involvement like district lines (gerrymandering).
- buzzerbetrayed 6y ago
  I'm not saying I disagree with you, but how would this work? At some point there has to be human decision when making the computer program that runs the policy. What's to keep the creators of the program from programming in their bias? Wouldn't the humans still teach the computer how to draw the district lines in a way that benefits their political party? If politicians wanted things to be fair they could get rid of gerrymandering right now without the need for a computer program. So why would they be ok with a computer that got rid of gerrymandering for them?
  - syntaxing 6y ago
    Totally agreed, that's why some sort of judiciary oversight is so important. But the important thing is that the cost function you optimize has to be "constitutionally" correct. Similar to the Census, more population gives your more House or Representative seats, etc. I would expect you can create something similar for other policies. E: And I also agree how today's problem should be able to be solved if policy makers wanted to. But if we went towards a data driven approach like the Census, these crooked policies should never been able to been in place to begin with.
neilwilson 6y ago
What's amusing is that you can probably do it without any 'fairness' tax at all - if there is sufficient saving. You just need to ensure everybody can sell their labour to the central bank for a fixed amount and that the central bank can credibly threaten to create alternative production at the low end. https://new-wayland.com/blog/look-ma-no-tax-from-zero-to-full-employment/ https://new-wayland.com/blog/look-ma-no-tax-from-zero-to-ful...
akimball 6y ago
The only "fair" tax policy is no tax policy. The function of taxation is to punish an activity, which is inherently discriminatory. In the context of a monetary sovereign, it serves no revenue function.
pradn 6y ago
Related: Denis Merigoux used formal methods to find discontinuities in the French tax code. This should be a matter of course, done but the OBM for every proposed tax law change. https://blog.merigoux.fr/en/2019/12/20/taxes-formal-proofs.html https://blog.merigoux.fr/en/2019/12/20/taxes-formal-proofs.h...
fegu 6y ago
The word fair has no meaning in a political context. To one it might seem fair that we all can afford the same things, to someone else it seems fair that we all keep what we make. And so on. A fairer tax policy is entirely in the eye of the beholder.
jl2718 6y ago
> maximizing both productivity and income equality > highest tax rates to rich and poor and the lowest to middle-income workers This somewhat obviously achieves both goals by encouraging productivity at the bottom and applying redistribution from the top. But... real tax systems are designed to maximize revenue, just like any business.
neilparikh 6y ago
The linked blog post doesn't mention anything about modelling the scarcity of land, so I'm a little skeptical about the results. In the modern world, one of the most biggest inequalities and barriers to efficiency is access to land, so not modelling that is a big oversight. It looks like they also only considered income taxes, and ignored all other taxes (such as resources extraction taxes and land taxes), which is also a big oversight. > However, finding a tax policy that optimizes equality along with productivity is an unsolved problem. "A land value tax is generally favored by economists as (unlike other taxes) it does not cause economic inefficiency, and it tends to reduce inequality. Land value tax has been referred to as "the perfect tax" and the economic efficiency of a land value tax has been known since the eighteenth century.", from https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax

159 points by asamant 6y ago

> was 16% fairer than a state-of-the-art progressive tax framework studied by academic economists. I wonder how fairness was measured.

grillermo 6y ago

With the little tiny weeny omission of debt from the model. “The economy”

deleted 6y ago
[deleted]
clavalle 6y ago
And spending resources to maintain existence.

adolph 6y ago

The article seems link free but the below seem to be related to the project. https://blog.einstein.ai/the-ai-economist/ https://blog.einstein.ai/the-ai-economist/ https://einstein.ai/the-ai-economist https://einstein.ai/the-ai-economist https://github.com/salesforce/ai-economist https://github.com/salesforce/ai-economist [edit: Sarcasm removed. I think the project is exciting. I don't think the stated value of data/ML being fairer than politics is very strong because (a.) politics is reflective of culture and represents a sophisticated method of developing consensus among many different ideas of what fair means, (b.) tax accounting work will just shift to GAN and the end result won't be much different just more complex.] GAN https://en.wikipedia.org/wiki/Generative_adversarial_network https://en.wikipedia.org/wiki/Generative_adversarial_network

Proven 6y ago
> Income inequality is one of the overarching problems of economics. Ridiculous! If that really needs to be solved I propose to learn from North Korea - they solved it without an AI. You don't need GPUs for that.

Proven 6y ago

That assertion is beyond laughable. First, I don't need an AI to know that all government departments except possibly Justice should be terminated. Secondly, this "AI can help" nonsense is nothing else but a script that outputs thoughts of computerized central planners and Keynesian/socialist intellectuals. And FA Hayek explained why that can never work. https://www.econlib.org/library/Essays/hykKnw.html https://www.econlib.org/library/Essays/hykKnw.html But going back to the previous point, how stupid would one have to be to not know that the optimal tax rate is 0? At that tax rate there's zero budget waste and up to 100% of one's income can be spent on "fair" causes.

0d311 6y ago

At the end of the article they say they’re releasing the source code, does anyone know where?

adolph 6y ago
I think it may be this: https://github.com/salesforce/ai-economist https://github.com/salesforce/ai-economist Foundation is a flexible, modular, and composable framework to model socio-economic behaviors and dynamics with both agents and governments. This framework can be used in conjunction with reinforcement learning to learn optimal economic policies, as done by the AI Economist (https://www.einstein.ai/the-ai-economist https://www.einstein.ai/the-ai-economist).

gilrain 6y ago

The problem is not that we don't know how to create a fair tax policy. The problem is that the unfair winners under current policy spend their wealth to prevent one from being implemented. It's a human greed problem; an AI cannot help us with that. This AI's advice world either be ignored, or its algorithms corrupted before it began.

adrianN 6y ago
I think you underestimate the complexity of tax policy. There are problems even with the definition of "fair".
leetcrew 6y ago
> The problem is not that we don't know how to create a fair tax policy. I would say this is a big chunk of the problem. people don't actually agree on what "fair" means. depending on who you ask, "fair" might mean anything between "I get to keep most of what I earn" and "everyone gets equal access to resources". regardless of what "fair" means to you, you still need to understand tax incidence (who actually bears the burden of a particular tax) to devise policies that achieve your goal. tax incidence can be a very controversial topic.
pc86 6y ago
What is a fair tax policy, then? Because the vast majority of tax policy debates I've seen are trying to craft a fair policy. Even folks I disagree with vehemently are generally interested in fairness.
- mistermann 6y ago
  > Even folks I disagree with vehemently are generally interested in fairness. I tend to think this is the case as well...it seems that, if you can manage to get people into a proper state of mind, or carefully phrase questions to avoid triggering heuristics in the subconscious mind, in my experience "most" people have fairly substantial intuitions of compassion, group solidarity, a desire to do the right thing, and all sorts of other good stuff. > What is a fair tax policy, then? Because the vast majority of tax policy debates I've seen are trying to craft a fair policy. I wonder if a substantial part of the problem might be that the mental concept of "fairness" is inherently and extremely subjective - if we were somehow able to view the source code of the mind, I suspect each individual's implementation of FairnessCoefficient() for any given subject would involve an absolutely massive number of variables, some that would seem to have no obvious relevance to the matter, and the code would be utterly riddled with bugs. I estimate this to be the case based on observations of how people discuss ideas, and how their minds will produce different (and logically inconsistent) answers to the same question by making very simple changes to the variables you ask them to consider when asking a question - or, even using the exact same variables, but changing the wording of the question. Another part of the problem of developing "fair" tax policy is linguistic: what does this word "fair"[1] mean? Like really mean, in the real world, the aggregate of all people's opinions? How might we know such a thing? Tax policy debates is one approach, but how accurate/optimal are the calculations these policies produce? Do they take into consideration the psychological impact it will have in a population, which in turn drives their behavior in a wide variety of ways (including voting), which in turn drives the real world success of the recommended policies? And, even if one assumes that these think tanks are producing fairly optimal (for the real world) recommendations, to what degree are they implemented consistent with their design? And where incomplete implementations occur (approximately always I would estimate), what are the downstream consequences of that - how far do the real world results skew from the model estimates when ~random changes are injected, or portions left out? How would we know the answers to such questions? How many people realize (like, really realize) how important these unknowns are? How many people actually think this level of detail is even worth acknowledging, let alone devoting some reasonable amount of effort into exploring? Perhaps some golden knowledge is located not too far below the surface? But how how would we know, if we don't even look? [2] I have no idea how, but it can easily be observed that most people seem to hold the belief that we do know such things (which is kind of interesting, if you think about it for a while.) Regarding fairness being inherently subjective (a matter of opinion), and the obvious folly in outsourcing calculations to academics (and ultimately politicians) rather than letting those whose lives are effected decide, people often remark that "people aren't smart enough" to properly assess what is "fair". I think there's actually a lot of truth to this. But then, if one was to study a feral child, you might discover that they do not have the ability to do many things that we take for granted, like perform the most basic of mathematical operations. Similarly, if you rewind time sufficiently, you can also find a point where even the brightest minds on the planet were unable to design a machine that can transport people through the air. This suggests that human beings have a unique characteristic compared to other mammals: the ability to learn and understand very complex multivariate ideas, as well as the ability to pass this knowledge down to subsequent generations. Considering this, just as we discovered a way to consistently teach people how to perform mathematics (and some other things), might there also be a way to teach people to at least somewhat skilfully consider the complexities involved in economics? But even if we did achieve that, there's still a problem in determining the aggregate of all people's opinions on the notion of economic fairness...how do we collect those opinions for analysis? As far as I can tell, this is widely considered to be a "solved problem" via two means: a) Democratic elections b) Public opinion surveys. My suspicion though, is that these two approaches may not actually be as optimal as we believe, in that several shortcomings should be fairly obvious with the mildest of examination. Despite this, it seems like these shortcomings are not considered noteworthy enough to do something about. Or, perhaps people don't actually consider ideas such as this, at all. This structural/epistemic shortcoming (and the substantial unawareness of it) in our society seems to be not only limited to the topic of economic fairness. For example, I often read online (the news, forum discussions, serious academic papers, etc) assertions of the form "People believe <X>" - or even more generally, "<X> <Y> <Z>", where the values of X,Y,Z can be near anything describing the real world, and people seem to typically label these assertions as "the facts". A bit of problem with this system though, is that most people seem to not realize (and very often seem to have a very strong aversion to realizing, or even discussing) is that most of these things that we have categorized as facts, are nothing of the kind. Rather, they are estimates. Some of them are surely fairly accurate, and many of them are likely amazingly inaccurate (even backwards, the opposite of what is true)...but what they aren't, is "facts". And yet, we seem to believe the opposite of this (that they are facts), and we then act upon these false beliefs, and then proceed to complain endlessly online that "things suck", and attribute it to <x>, or <-x> (say, political parties), typically inline with other beliefs, which are also not true. I wonder what a disinterested alien from another planet might think about the human species. Here we have these people who are able to achieve the most wondrous technological things, like splitting the atom, for example - and then with this knowledge, proceed to use it to design a weapon that can be dropped on other members of their species who live in far away lands, who happen to have different ideas than them (or something like that, the true causation may not be well understood). They have the ability and the drive to see and understand the form of matter down to the quantum level, spending many of billions in the process, with no particular real world application in mind for this knowledge, but then simultaneously seem unwilling (perhaps, unable) to provide basic food and shelter for a substantial number of their species, or devote any widespread, serious/skilful mental energy into that arguably far more "important" problem (and this is just one example, there are many others). They have the infinite curiosity required to develop technology that can see deep into the subatomic level of material reality, or light years into outer space - things that are at best mildly interesting to most people - yet simultaneously seem to have very little curiosity (if not an outright refusal) for attempting to understand that which causes widespread material discomfort (at home or abroad), things that have been complained about in widespread abundance, for centuries. They have seemingly endless energy and time for complaining about certain aspects of reality, but little time or curiosity for what actually causes it.[3] What a curious species, these humans. [1] https://www.merriam-webster.com/dictionary/fair https://www.merriam-webster.com/dictionary/fair [2] https://en.wikipedia.org/wiki/Streetlight_effect https://en.wikipedia.org/wiki/Streetlight_effect [3] http://media.moronail.net/images/stories/dg_pictures/0905/1392.jpg http://media.moronail.net/images/stories/dg_pictures/0905/13...

LatteLazy 6y ago

It can't do shit until you have a computable definition of "fair"

kortex 6y ago
> In economics, the Gini coefficient is a measure of statistical dispersion intended to represent the income inequality or wealth inequality within a nation or any other group of people. I'm guessing this is their metric. https://en.m.wikipedia.org/wiki/Gini_coefficient https://en.m.wikipedia.org/wiki/Gini_coefficient
- jstanley 6y ago
  You can fix all wealth and income inequality with a simple 100% tax on everything, but that doesn't make it fair.
- LatteLazy 6y ago
  Gini just measures inequality doesn't it? So a perfect Gini coefficient would be quickly achieved with a 100% tax on all wealth and income. I'm not sure I'd say that was fair or a preferable way to live though...
at_a_remove 6y ago
Indeed. Some view fairness as "I worked more, therefore I deserve more" and some view fairness as I should get the same as everyone else, regardless.
clavalle 6y ago
I think a better metric would be net value creation. There are two times to care about inequality: When the low-end creates physical suffering and when the high end controls enough they can force the low end into suffering. But, between those markers there's a /lot/ of room to maneuver. I really feel like the term inequality is a simple placeholder for a more complex idea that has morphed into it's own, mis-aimed, creature.
driverdan 6y ago
It also assumes that "fair" is the desirable outcome.

blippage 6y ago

As the saying goes: To err is human, but to really foul things up you need a computer. -- Paul R. Ehrlich

tboyd47 6y ago
I've come to believe the most dangerous thing in the world is an expert with a computer model.
- mtgx 6y ago
  Yes, this is the real danger of "AI" - ignorant people using it to control society thinking the AI is the "best" at everything and fair, not that the AI will become "self-aware" and destroy us. Humans that control very powerful "AI" are much more dangerous, especially when they wrongly believe the AI's algorithms are flawless or even "much better than a human"(which a lot of people do when they get caught up in the AI hype).
- pjmorris 6y ago
  Maybe. I'm more worried about hundreds of thousands of amateurs with computer models (Excel spreadsheets.)
  - tboyd47 6y ago
    I'd actually be more okay with that because their models don't influence policy.
    - pjmorris 6y ago
      I don't see it that way; The aggregate effects of cost optimization by amateurs with spreadsheets at 100 F500 companies, 1000 mid-sized firms, 10,000 cites, 100,000 small firms has got to look a lot like policy.

Verdex 6y ago

From the article: "In the simulation, four AI workers are each controlled by their own reinforcement-learning models. They interact with a two-dimensional world, gathering wood and stone and either trading these resources with others or using them to build houses, which earns them money. The workers have different levels of skill, which leads them to specialize." So I'm sure they can create a fairer tax policy ... as long as our world is equivalent to a simplified version of age of empires. This is just someone's hobby that they somehow convinced other people was serious work.

HenryKissinger 6y ago
> So I'm sure they can create a fairer tax policy ... as long as our world is equivalent to a simplified version of age of empires. Greetin. Correctus? Estorer.

umvi 6y ago

We can't even agree on what "fair" means. Setting aside tax avoidance, which is a different issue, people are upset Trump didn't have to pay taxes on years his businesses had massive losses. Many people think fair means "if you are rich, you should have to pay a large amount of taxes every year no matter what". But actually, you can be rich and bleeding money left and right. If you had negative annual income, even if you are rich, I don't think the government should also get in on the action and bleed you some more just because you have money. Tax money when it changes hands.

blippage 6y ago
As one hedge fund manager put it: what exactly is "fair" anyway, and how will you know when you've attained it?
vmception 6y ago
Exactly, governments are incentivizing transactions: “if you borrow and spend in the real economy then it offsets what you pay us, here are a few perks to help that along.” People also dont seem to understand that a limited partnership can borrow other people’s money, have overhead costs and also pay you a salary+distributions, but the partnership tax returns passes all the overhead costs to your personal tax return showing a big “loss” while not showing you personally made money that year because the losses naturally eclipse that. You can still buy a mansion in all cash and not be in debt and not have anything to pay governments. Doesn't take an army of accountants and lawyers to understand that. Well, except for the people that think they need an army of accountants and lawyers to form a Limited Partnership.
rtkwe 6y ago
It's partially that everything about the man feels like a fishy facade and that the combination of running everything as a pass through but also having business bankruptcies. There's also the question of stories like [0] where there are huge loses claimed that on closer examination seem dubious and are later banned. I think it's the mixing of personal and 'business' finances that really muddle the waters here and that the twin facts of him being 'rich' and 'losing gobs of money for decades' feels unfair. [0] https://www.seattletimes.com/nation-world/trump-lawyers-advised-him-that-irs-might-call-tax-dodge-improper/ https://www.seattletimes.com/nation-world/trump-lawyers-advi...

notahacker 6y ago

> In the simulation, four AI workers are each controlled by their own reinforcement-learning models. They interact with a two-dimensional world, gathering wood and stone and either trading these resources with others or using them to build houses, which earns them money. The workers have different levels of skill, which leads them to specialize. Lower-skilled workers learn they do better if they gather resources, and higher-skilled ones learn they do better if they buy resources to build houses. So basically they're tackling one of the hardest macroeconomic problems with a simple and completely abstract microeconomic model which sounds less like cutting edge AI and more like a fusion of iterated prisoner dilemma models and the Edgeworth box. > the AI’s policy cobbled together aspects of both, applying the highest tax rates to rich and poor Sounds like they've overfitted to the model's assumptions so much their agents are choosing to not be poor primarily to reduce their tax bill...

yowlingcat 6y ago
How did I know that this would be the result from the headline? It's just like the old saying. Garbage in, garbage out.
- rrobukef 6y ago
  An important distinction: publishable garbage! Luckily, there is now a baseline, the next person can only publish improvements. Maybe one day we reach Hari Seldon levels of AI.
Cthulhu_ 6y ago
Yeah, it sounds more like they're training an AI for resource management games (like idk, Dwarf Fortress and co?)
Serious_Cheese 6y ago
The headline is misleading (click-bait). Reading the headline, I imagined they have simulated the entire economy of the world and have used reinforcement learning to find optimal policies, but they only simulated 4 workers and are making generalization to the entire economy.

woile 6y ago

If I understood correctly "Good economics for hard times", this statement is not correct: > taxing people too much can discourage them from working or motivate them to find ways to avoid paying—which reduces the overall pot. What's the evidence baking that claim?

goatinaboat 6y ago
What's the evidence baking that claim? This is called the Laffer Curve https://en.wikipedia.org/wiki/Laffer_curve https://en.wikipedia.org/wiki/Laffer_curve
- MereInterest 6y ago
  And again, where is the evidence for this claim? I've gone through the last 50 years of US tax cuts, and every time the taxes are cut, revenue decreases. The Laffer Curve may be an interesting theoretical model, but using it to influence any policy decision is laffable.
  - wavefunction 6y ago
    As you point out the effects proposed by the Laffer curve have never been observed in the real world and instead the opposite has been true. It's an article of faith among many American conservatives though and faith cannot be overcome by facts.
    - pc86 6y ago
      This seems unnecessarily dismissive. It sounds like you're arguing the Laffer curve doesn't exist, which is a pretty bold claim not backed up by scholarship. This is a very different claim than "the US is on the left side of the curve" which even a lot of conservatives agree with. If you're arguing against the existence of the curve, it would mean that a marginal increase from 99% to 100% would increase revenue which seems unlikely.
      - 6y ago

blippage 6y ago

Here's the wisest economic saying I have ever heard: governments should run the economy like a housewife runs her household budget. That was Margaret Thatcher. The second-most insightful saying on economics I have ever heard: The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design. -- Friedrich August von Hayek Forget the AI, forget the experts, forget the professors with their PhDs in economics. They're all just guessers, making guesses that are as likely to be wrong as they are to be right. Got that?

admax88q 6y ago
I strongly disagree with running the government like a household budget. It seems like a nice simple reduction but they're very different things. Corporations don't run as household budgets, neither should governments. Two main differences, growth and taxation. Growth means that economically you can outspend your "budget" every year and still come out ahead because that spend this year makes next year's budget larger. Taxation means your can spend money on any one initiative and if it increases economic activity in any way you can make it back via unrelated taxes without increasing any tax rates or fees. Households have neither of these options.
- luckylion 6y ago
  A household could also just spend money hoping to increase next year's income (because you bought a bigger car or a new suit/dress). If that works, you'll also "come out ahead". But it usually doesn't, I guess. For taxation, you might consider stock market investments a similar thing "oh sure, I spend money here, but by doing so I stimulate the economy and I get dividends from my shares". Of course, they can't just declare themselves shareholders of other companies and send in the cops to collect money, that's a state-level privilege.
- winstonewert 6y ago
  It seems to me that its not really that different from a household. A household can also end up ahead if it outspends in ways that contribute to future growth. In fact, most people do to get an education, buy a house, etc. It seems to me that it's not a really question of whether or not its a household, its whether the spending actually contributes to growth. Fundamentally, that depends on how its spent. If you spend the money bombing countries in the middle east, probably not.

fizixer 6y ago

> AI ... simulate ... Wow, so now the whole of CSE (computational science and engineering) is AI. Great, I can call myself AI researcher.

pjmorris 6y ago

FTA > “It would be amazing to make tax policy less political and more data driven,” Seems like an ...optimistic... viewpoint. IMO, the model, the data, and the notion of fairness are all political. > "the result appears counterintuitive and not something that a human might have devised." Will a legislator be willing to enact a policy that doesn't meet their intuitions?

remram 6y ago
I don't know, that seems to match real-world policies, where there are unemployment aids but they're usually contingent on you being employed some of the time (e.g. runs out if you haven't been employed in X months).
- pjmorris 6y ago
  Perhaps the specific example policy seems intuitive to some. I'm wondering about the general case. There's a problem of interpretability in AI models, it seems like there's also a related problem in terms of how to make decisions based on uninterpretable (unintuitive) models.
  - remram 6y ago
    Yes, and there's also the possibility of over-fitting, finding a local minimum, or the population size being too small...
maerF0x0 6y ago
> fairness are all political Exactly. I came to say exactly that. Think a hypothetical of when you're a child and your mom has to decide how many cookies your mom gives you and your brother: * Should mom give you equal cookies? * Or should she your brother 2x the cookies because you're 5 and he's 15 and has 2x the caloric needs? * Or should she give you 10x the cookies because he's had so many cookies in his life and you've had comparatively so few? * Or should he give you more cookies because you're 1/2 his weight and we want to equalize those. * Or maybe she should give you less cookies because you're fat for your age and he's not. * Or maybe she should give you more cookies because you like them more than he does and would get more out of them. * Or maybe she should give you chips because you're allergic to the chocolate in cookies and it would kill you. But what's the right chips to cookies ratio that is fair? And what if your brother also wants chips too, but we only have so many cookies and so many chips and him eating chips means less for you and he can eat cookies, so why should he get chips? But if you're getting 10 chips, and he's getting 0, how is that fair? WTF is "fair"?

baron_harkonnen 6y ago

I highly recommend Jeffrey Winters' book "Oligarchy" to understand tax policy. Though an academic book Oligarchy is very easy to read and surprisingly neutral politically. Winters basically says that oligarchy is when a particular economic group has asymmetric power in a society, arguing that the main use of the power is wealth defense. He then outlines how this has four major forms: - Warring oligarchies where warlords fight each other to protect wealth - Ruling oligarchies similar to Italian city states - Sultanistic oligarchies were multiple oligarchs align to support a single oligarchical ruler - Civil oligarchies which are basically like the US and Singapore where oligarchs mostly use tax law and investment strategies for wealth defense. The main evolution between these oligarchies is how much energy needs to be expended in wealth defense, the earlier stages requires constant violence against both the lower class and competing oligarchs, evolving to more cooperation between oligarchs and finally when the wealth class agree to the civil law so long as it can still defend its wealth. In the case of civil oligarchy, Winters argues that nearly all of wealth defense and manipulation of the law is basically around tax codes and loop holes that allow wealth defense. The oligarchs in general are fine surrendering their military power (which is expensive anyway) so long as they can still defend their wealth. They agree to adhere to the rule of law, so long as the rule of law doesn't impact their ability to maintain wealth. The conclusion of course being that we will always have complex tax law because it is required by the ruling oligarchy.

barbarbar 6y ago
Thank you for this very useful summary.
germinalphrase 6y ago
I would be curious to understand how a flat tax would interact with this premise.
- notahacker 6y ago
  It's an alternative strategy for oligarchies to defend their wealth

webel0 6y ago

This sounds rather similar to a lot of the work being done in macro/public finance right now. If you look at a model from someone like Mendoza you’ll see that they have several parts of the economy characterized as recursive optimization problems + various constraints. As others have pointed out, however, it is quite difficult to interpret these model results. The best you can do oftentimes is argue for why your setup makes sense then provide some intuition for what is going on. The problem is that slightly tweaked models are capable of delivering qualitatively divergent results. I do think that reinforcement learning brings to the table some novel techniques for solving models with larger state spaces, though.

captainzidgel 6y ago

"Father, why are we only allowed 2 portions of stew a day?" "Hush, my child. Econatron 1.3 Nightly 20310201 dictates it. It sees all. It knows all."

ilaksh 6y ago

Haven't we known for years which parts of the tax policy are outdated and unfair? (All of them).

zadkey 6y ago

It could for sure. But that assumes it is set up correctly. And even if it is setup correctly and runs realistic simulations, there are often in real life unforeseen variables like hurricanes, earthquakes, new discoveries, etc. But how we define what is a fair tax policy is incredibly important. If the goal is not well defined how can an AI reach it? What about other economic factors. What if a fair tax policy is not complete or possible without some other economic element(s) as a counterpart. What if a fair tax policy could only exist when Universal Basic Income is established. But let's say that somehow magically all unexpected circumstances are accounted for. And the AI does successfully create a fair tax policy. There will be those whose stand to loose a large amount under a fair tax policy. They are few, but they are powerful and wield massive influence over government. Would they go along with such a policy? It doesn't seem likely. It seems like even If you get a fair tax policy that is created, there will be people honestly questioning it's validity and people who are against regardless of how valid the result is. It just seems unlikely to succeed. It may be useful economists might dissect what result it gives hoping to find new insights. But beyond that, I'm not sure how much good would realistically come from it.

varispeed 6y ago
Something like "fair" tax policy is impossible because the world isn't fair. It's like trying to find mathematical formula to make 2 x 2 equal 5. Anyone trying to shape tax policy is biased one way or another and is causing detachment from effort and reward which is extremely demotivating. It looks innocent on a spreadsheet, but tell someone who worked hard all their life that now they need to part with half of their salary to fund some vanity projects meanwhile they neighbour gets paid for watching telly all day.
- Nasrudith 6y ago
  In my opinion the fairness of the world is irrelevant as no matter what search space of possible and impossible combinations and get you will never find universal consensus on what qualifies as "fair" making the asking futile. Is a world where any form of violence is literally impossible unfair to others in worlds wracked by it or who desire it consensually?

tharne 6y ago

Opaque and complex models used to dictate economic policy. What could go wrong? I know Trump and Covid suck a lot of oxygen out of the room, but heck, 2008 wasn't all that long ago. Remember when a bunch of sophisticated models told us that a mass default on U.S. mortgages was statistically impossible? Taxes are about tradeoffs, not fairness. You're talking money from people under the threat of jail, there's no fairness there, only a weighing of individual rights vs. the needs of the many. Every tax policy is a compromise of some sort with varying degrees of winners and losers. This is a political problem not a technical one.

varispeed 6y ago

Someone should read some of Richard Thaler's works. In other words you cannot simulate population's irrational behaviour. The fact that someone wants to take other person fruits of work and redistribute them using arbitrary rules, means anything but fair.

maerF0x0 6y ago
Any specific recommendation?
- varispeed 6y ago
  I would recommend reading "Misbehaving" that talks about economy and people behaviour. It is quite an eye opener.

hnracer 6y ago

Simulation has been used extensively by economists going back decades. One example is the Dynamic Stochastic General Equilibrium model. Often the output is determined and easily predicted by the input assumptions and the results you get back aren't surprising given an understanding of those assumptions as well as the process that generates the output. Quite often it's a case of garbage in garbage out. Worse yet is when the results are spun as a finding/discovery in the empirical sense when in reality it's very common for researchers to fudge the inputs in order to get an output that is coherent and aligns with both common sense and extant theory. Simulation (Monte Carlo) is much more reliable in financial product research since the market does seem to obey some stable distributional dynamics, and the consequences on product pricing are well understood.

mchisto 6y ago

An AI youtuber who explains papers has covered it: https://www.youtube.com/watch?v=F5aaXrIMWyU https://www.youtube.com/watch?v=F5aaXrIMWyU Highly recommend.

currymj 6y ago

it’s very cool work; i wish we could ban the use of “AI” as a noun. it only ever confuses people.

saynototaxation 6y ago

Taxation is theft, because no one is allowed to take my property without my permission. By paying taxes you support theft!

Mupuff 6y ago

The issue is that the bottleneck is not coming up with the solution - but actually getting the political capital to pass it.

GoodJokes 6y ago

We don’t need AI to create a fair tax policy. We need political will.

syntaxing 6y ago

I know there's a lot of nuances in this, but I really with the US would head towards computer driven policies (with judiciary oversight). Think of it as Census v2.0. There's so many things that should not have human involvement like district lines (gerrymandering).

buzzerbetrayed 6y ago
I'm not saying I disagree with you, but how would this work? At some point there has to be human decision when making the computer program that runs the policy. What's to keep the creators of the program from programming in their bias? Wouldn't the humans still teach the computer how to draw the district lines in a way that benefits their political party? If politicians wanted things to be fair they could get rid of gerrymandering right now without the need for a computer program. So why would they be ok with a computer that got rid of gerrymandering for them?
- syntaxing 6y ago
  Totally agreed, that's why some sort of judiciary oversight is so important. But the important thing is that the cost function you optimize has to be "constitutionally" correct. Similar to the Census, more population gives your more House or Representative seats, etc. I would expect you can create something similar for other policies. E: And I also agree how today's problem should be able to be solved if policy makers wanted to. But if we went towards a data driven approach like the Census, these crooked policies should never been able to been in place to begin with.

neilwilson 6y ago

What's amusing is that you can probably do it without any 'fairness' tax at all - if there is sufficient saving. You just need to ensure everybody can sell their labour to the central bank for a fixed amount and that the central bank can credibly threaten to create alternative production at the low end. https://new-wayland.com/blog/look-ma-no-tax-from-zero-to-full-employment/ https://new-wayland.com/blog/look-ma-no-tax-from-zero-to-ful...

akimball 6y ago

The only "fair" tax policy is no tax policy. The function of taxation is to punish an activity, which is inherently discriminatory. In the context of a monetary sovereign, it serves no revenue function.

pradn 6y ago

Related: Denis Merigoux used formal methods to find discontinuities in the French tax code. This should be a matter of course, done but the OBM for every proposed tax law change. https://blog.merigoux.fr/en/2019/12/20/taxes-formal-proofs.html https://blog.merigoux.fr/en/2019/12/20/taxes-formal-proofs.h...

fegu 6y ago

The word fair has no meaning in a political context. To one it might seem fair that we all can afford the same things, to someone else it seems fair that we all keep what we make. And so on. A fairer tax policy is entirely in the eye of the beholder.

jl2718 6y ago

> maximizing both productivity and income equality > highest tax rates to rich and poor and the lowest to middle-income workers This somewhat obviously achieves both goals by encouraging productivity at the bottom and applying redistribution from the top. But... real tax systems are designed to maximize revenue, just like any business.

neilparikh 6y ago

The linked blog post doesn't mention anything about modelling the scarcity of land, so I'm a little skeptical about the results. In the modern world, one of the most biggest inequalities and barriers to efficiency is access to land, so not modelling that is a big oversight. It looks like they also only considered income taxes, and ignored all other taxes (such as resources extraction taxes and land taxes), which is also a big oversight. > However, finding a tax policy that optimizes equality along with productivity is an unsolved problem. "A land value tax is generally favored by economists as (unlike other taxes) it does not cause economic inefficiency, and it tends to reduce inequality. Land value tax has been referred to as "the perfect tax" and the economic efficiency of a land value tax has been known since the eighteenth century.", from https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax