Taxation is a dilemma that has haunted economists through the ages. The AI Economist may help resolve the vexed problem.

The AI Economist is an artificial intelligence system designed by American technology company Salesforce (NYSE: CRM). The program develops and tests the ideal tax system for a country inside a simulated environment. (TechXplore)

Taxation and inequality – Salesforce AI to the fore

Economists’ classical dilemma on taxation is striking the balance between taxing too much, thereby reducing the incentive to earn, and taxing too little, thereby creating inequalities.

The Salesforce AI Economist software attempts to devise an equitable taxation system through the application of reinforcement learning.

Reinforcement learning is the training of machine learning models to make a sequence of decisions in an uncertain, complex environment. The computer attempts to solve the problem using various permutations and combinations through a system of trial and error. The program earns a reward or penalty depending on the outcome of its actions.

Starting from random trials the program is ultimately able to come up with sophisticated solutions.

AI Economist uses this procedure to assist governments across the world in the development of AI-driven tax policies. The objective: a fair and equitable taxation system.

Richard Socher, who heads the six-person Salesforce research team, said: “With the AI Economist, we’ve applied reinforcement learning algorithms to discover how novel tax frameworks can reduce inequality and improve economic productivity, and ultimately make the world a better place.”

The system constructs millions of years of hypothetical economic models to arrive at a solution that generates the highest income along with the maximum productivity.

In tests, the Salesforce researchers found that the solutions from AI Economist were at least 16% more effective than those created by economists in the real world.

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