All political parties and their members have different ideas about what a country’s fiscal and tax policies should be to achieve a progressive society that leaves no one behind. However, every time we change one variable, many others are directly affected. Sometimes, we manage to predict these changes correctly, and other times we encounter unexpected results in sectors we hadn’t even considered. It’s not easy to implement various fiscal and tax policies to see what works best in a society, as obviously, you can’t play with people’s well-being, and many results take time to be reflected, besides being affected by external factors. Luckily for us, in the AI era, it is possible to create a simulated model of a tailor-made world, with artificially created individuals and resources, and conduct all the experiments we can think of based on that.
The AI Economist: Improving Equality and Productivity with AI-Driven Tax Policies, is the title of research conducted by Stephan Zheng, Alexander Trott, Sunil Srinivasa, Nikhil Naik, Melvin Gruesbeck, David C. Parkes, and Richard Socher that deals with this.
Let’s imagine a politician comes and tells us that he will improve the middle class by applying a certain policy. Promises abound in election times. So let’s imagine what would happen if we could carry out a test of what this person suggests, but in a safe environment, in a virtual world, completely simulated by AI.
What Zheng and Trott et al. 2020 proposed is a virtual system in which a set of workers capable of learning through repetition, observing their environment and the tax scheme, decide for themselves how to proceed. They start working, pay their taxes, and over time, seek to maximize their well-being within that tax model. On one hand, on the other hand, the actions of a central government and market regulator are also simulated, which pays attention to inequality, wealth distribution, and other market variables, and then adjusts its tax and distributive policies to achieve the best possible results according to what we want to achieve.
Finding a model that maximizes equality and productivity together is not easy at all, as each modified variable ends up affecting another set of variables, which in turn can affect others, and so on.
Each of us was born randomly where we were, with a given context and situation that is unique to each person. Thinking about the probabilities of that repeating, understanding the biological and family chain that led to your existence, along with the union of a completely random sperm and egg, in an era where medical technology allowed you to come into this world without major issues, is almost impossible to repeat. Knowing then all the injustices that exist in the world and the few chances you had of being so lucky at birth, wouldn’t it be fair to create the conditions of a world in which we would all like to live if we didn’t know in advance in what context we would be born?
I repeat once again, this was nothing more than a simple simulation, not easily extrapolable to the physical world, where there is more than one state, with independent rules, beyond all being united by the international market, and where, therefore, making decisions for universal benefit that truly includes everyone is impossible as long as the current border regimes remain in force. Sometimes I even wonder why every time we think about what the economy of the first people to inhabit and colonize other planets like Mars will be like, we don’t imagine a free economy, but a system based on cooperation. We’ll see if Uncle Sam’s ideals can reach that far. I mean, who sets the rules if the colonizer is a private entity, as it could potentially be Elon Musk?
Lastly, and not least, we must mention the recent agreement, from June 2021, of the G7 countries (Germany, Canada, the United States, France, Italy, Japan, and the United Kingdom), to establish a global minimum tax of 15% for large multinationals. This pact reached by the finance ministers of the world’s most industrialized countries seeks to promote a series of common rules globally for giants like Amazon, Google, Facebook, or Uber. This agreement, which took years of debate, represents a historic change in terms of reforming the global tax system, adjusting to the era of borderless companies, assuming of course that the measure will also be adopted by the rest of the countries in the international system of states.