We explore a model of non-Bayesian information aggregation in networks. Agents non-cooperatively choose among Friedkin-Johnsen type aggregation rules to maximize payoffs. The DeGroot rule is chosen in equilibrium if and only if there is noiseless information transmission, leading to consensus. With noisy transmission, while some disagreement is inevitable, the optimal choice of rule amplifies the disagreement: even with little noise, individuals place substantial weight on their own initial opinion in every period, exacerbating the disagreement. We use this framework to think about equilibrium versus socially efficient choice of rules and its connection to polarization of opinions across groups.
{"title":"Consensus and Disagreement: Information Aggregation under (not so) Naive Learning","authors":"Abhijit Banerjee, Olivier Compte","doi":"arxiv-2311.08256","DOIUrl":"https://doi.org/arxiv-2311.08256","url":null,"abstract":"We explore a model of non-Bayesian information aggregation in networks.\u0000Agents non-cooperatively choose among Friedkin-Johnsen type aggregation rules\u0000to maximize payoffs. The DeGroot rule is chosen in equilibrium if and only if\u0000there is noiseless information transmission, leading to consensus. With noisy\u0000transmission, while some disagreement is inevitable, the optimal choice of rule\u0000amplifies the disagreement: even with little noise, individuals place\u0000substantial weight on their own initial opinion in every period, exacerbating\u0000the disagreement. We use this framework to think about equilibrium versus\u0000socially efficient choice of rules and its connection to polarization of\u0000opinions across groups.","PeriodicalId":501487,"journal":{"name":"arXiv - QuantFin - Economics","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-11-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138534965","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Christopher J. Banks, Katherine Simpson, Nicholas Hanley, Rowland R. Kao
Financial incentives are provided by governments to encourage the plantation of new woodland to increase habitat, biodiversity, carbon sequestration, and other economic benefits for landowners. Whilst these are largely positive effects, it is worth considering that greater biodiversity and presence of wildlife species in proximity to agricultural holdings may pose a risk of disease transmission between wildlife and livestock. Wildlife transmission and the provision of a reservoir for infectious disease is particularly important in the transmission dynamics of bovine tuberculosis. In this paper we develop an economic model for changing land use due to forestry subsidies. We use this asses the impact on wild deer populations in the newly created woodland areas and the emergent infectious disease risk arising from the proximity of new and existing wild deer populations and existing cattle holdings. We consider an area in the South-West of Scotland, having existing woodland, deer populations, and extensive and diverse cattle farm holdings. In this area we find that, with a varying level of subsidy and plausible new woodland creation, the contact risk between areas of wild deer and cattle increases between 26% and 35% over the contact risk present with zero subsidy. This model provides a foundation for extending to larger regions and for examining potential risk mitigation strategies, for example the targeting of subsidy in low risk areas or provisioning for buffer zones between woodland and agricultural holdings.
{"title":"Assessing the potential impact of environmental land management schemes on emergent infection disease risks","authors":"Christopher J. Banks, Katherine Simpson, Nicholas Hanley, Rowland R. Kao","doi":"arxiv-2311.07735","DOIUrl":"https://doi.org/arxiv-2311.07735","url":null,"abstract":"Financial incentives are provided by governments to encourage the plantation\u0000of new woodland to increase habitat, biodiversity, carbon sequestration, and\u0000other economic benefits for landowners. Whilst these are largely positive\u0000effects, it is worth considering that greater biodiversity and presence of\u0000wildlife species in proximity to agricultural holdings may pose a risk of\u0000disease transmission between wildlife and livestock. Wildlife transmission and\u0000the provision of a reservoir for infectious disease is particularly important\u0000in the transmission dynamics of bovine tuberculosis. In this paper we develop an economic model for changing land use due to\u0000forestry subsidies. We use this asses the impact on wild deer populations in\u0000the newly created woodland areas and the emergent infectious disease risk\u0000arising from the proximity of new and existing wild deer populations and\u0000existing cattle holdings. We consider an area in the South-West of Scotland, having existing woodland,\u0000deer populations, and extensive and diverse cattle farm holdings. In this area\u0000we find that, with a varying level of subsidy and plausible new woodland\u0000creation, the contact risk between areas of wild deer and cattle increases\u0000between 26% and 35% over the contact risk present with zero subsidy. This model provides a foundation for extending to larger regions and for\u0000examining potential risk mitigation strategies, for example the targeting of\u0000subsidy in low risk areas or provisioning for buffer zones between woodland and\u0000agricultural holdings.","PeriodicalId":501487,"journal":{"name":"arXiv - QuantFin - Economics","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-11-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138534977","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The rise of generative artificial intelligence (AI) has sparked concerns about its potential influence on unemployment and market depression. This study addresses this concern by examining the impact of generative AI on product markets. To overcome the challenge of causal inference, given the inherent limitations of conducting controlled experiments, this paper identifies an unanticipated and sudden leak of a highly proficient image-generative AI as a novel instance of a "natural experiment". This AI leak spread rapidly, significantly reducing the cost of generating anime-style images compared to other styles, creating an opportunity for comparative assessment. We collect real-world data from an artwork outsourcing platform. Surprisingly, our results show that while generative AI lowers average prices, it substantially boosts order volume and overall revenue. This counterintuitive finding suggests that generative AI confers benefits upon artists rather than detriments. The study further offers theoretical economic explanations to elucidate this unexpected phenomenon. By furnishing empirical evidence, this paper dispels the notion that generative AI might engender depression, instead underscoring its potential to foster market prosperity. These findings carry significant implications for practitioners, policymakers, and the broader AI community.
{"title":"The Impact of Generative Artificial Intelligence","authors":"Kaichen Zhang, Ohchan Kwon, Hui Xiong","doi":"arxiv-2311.07071","DOIUrl":"https://doi.org/arxiv-2311.07071","url":null,"abstract":"The rise of generative artificial intelligence (AI) has sparked concerns\u0000about its potential influence on unemployment and market depression. This study\u0000addresses this concern by examining the impact of generative AI on product\u0000markets. To overcome the challenge of causal inference, given the inherent\u0000limitations of conducting controlled experiments, this paper identifies an\u0000unanticipated and sudden leak of a highly proficient image-generative AI as a\u0000novel instance of a \"natural experiment\". This AI leak spread rapidly,\u0000significantly reducing the cost of generating anime-style images compared to\u0000other styles, creating an opportunity for comparative assessment. We collect\u0000real-world data from an artwork outsourcing platform. Surprisingly, our results\u0000show that while generative AI lowers average prices, it substantially boosts\u0000order volume and overall revenue. This counterintuitive finding suggests that\u0000generative AI confers benefits upon artists rather than detriments. The study\u0000further offers theoretical economic explanations to elucidate this unexpected\u0000phenomenon. By furnishing empirical evidence, this paper dispels the notion\u0000that generative AI might engender depression, instead underscoring its\u0000potential to foster market prosperity. These findings carry significant\u0000implications for practitioners, policymakers, and the broader AI community.","PeriodicalId":501487,"journal":{"name":"arXiv - QuantFin - Economics","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-11-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138534972","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We provide four novel results for nonhomothetic Constant Elasticity of Substitution preferences (Hanoch, 1975). First, we derive a closed-form representation of the expenditure function of nonhomothetic CES under relatively flexible distributional assumptions of demand and price distribution parameters. Second, we characterize aggregate demand from heterogeneous households in closed-form, assuming that household total expenditures follow an empirically plausible distribution. Third, we leverage these results to study the Euler equation arising from standard intertemporal consumption-saving problems featuring within-period nonhomothetic CES preferences. Finally, we show that nonhomothetic CES expenditure shares arise as the solution of a discrete-choice logit problem.
{"title":"Aggregation and Closed-Form Results for Nonhomothetic CES Preferences","authors":"Clement E. Bohr, Martí Mestieri, Emre Enes Yavuz","doi":"arxiv-2311.06740","DOIUrl":"https://doi.org/arxiv-2311.06740","url":null,"abstract":"We provide four novel results for nonhomothetic Constant Elasticity of\u0000Substitution preferences (Hanoch, 1975). First, we derive a closed-form\u0000representation of the expenditure function of nonhomothetic CES under\u0000relatively flexible distributional assumptions of demand and price distribution\u0000parameters. Second, we characterize aggregate demand from heterogeneous\u0000households in closed-form, assuming that household total expenditures follow an\u0000empirically plausible distribution. Third, we leverage these results to study\u0000the Euler equation arising from standard intertemporal consumption-saving\u0000problems featuring within-period nonhomothetic CES preferences. Finally, we\u0000show that nonhomothetic CES expenditure shares arise as the solution of a\u0000discrete-choice logit problem.","PeriodicalId":501487,"journal":{"name":"arXiv - QuantFin - Economics","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-11-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138534973","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article concerns the optimal choice of flat taxes on labor and capital income, and on consumption, in a tractable economic model. Agents manage a portfolio of bonds and physical capital while subject to idiosyncratic investment risk and random mortality. We identify the tax rates which maximize welfare in stationary equilibrium while preserving tax revenue, finding that a very large increase in welfare can be achieved by only taxing capital income and consumption. The optimal rate of capital income taxation is zero if the natural borrowing constraint is strictly binding on entrepreneurs, but may otherwise be positive and potentially large. The Domar-Musgrave effect, whereby capital income taxation with full offset provisions encourages risky investment through loss sharing, explains cases where it is optimal to tax capital income. In further analysis we study the dynamic response to the substitution of consumption taxation for labor income taxation. We find that consumption immediately drops before rising rapidly to the new stationary equilibrium, which is higher on average than initial consumption for workers but lower for entrepreneurs.
{"title":"Optimal taxation and the Domar-Musgrave effect","authors":"Brendan K. Beare, Alexis Akira Toda","doi":"arxiv-2311.05822","DOIUrl":"https://doi.org/arxiv-2311.05822","url":null,"abstract":"This article concerns the optimal choice of flat taxes on labor and capital\u0000income, and on consumption, in a tractable economic model. Agents manage a\u0000portfolio of bonds and physical capital while subject to idiosyncratic\u0000investment risk and random mortality. We identify the tax rates which maximize\u0000welfare in stationary equilibrium while preserving tax revenue, finding that a\u0000very large increase in welfare can be achieved by only taxing capital income\u0000and consumption. The optimal rate of capital income taxation is zero if the\u0000natural borrowing constraint is strictly binding on entrepreneurs, but may\u0000otherwise be positive and potentially large. The Domar-Musgrave effect, whereby\u0000capital income taxation with full offset provisions encourages risky investment\u0000through loss sharing, explains cases where it is optimal to tax capital income.\u0000In further analysis we study the dynamic response to the substitution of\u0000consumption taxation for labor income taxation. We find that consumption\u0000immediately drops before rising rapidly to the new stationary equilibrium,\u0000which is higher on average than initial consumption for workers but lower for\u0000entrepreneurs.","PeriodicalId":501487,"journal":{"name":"arXiv - QuantFin - Economics","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-11-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138534969","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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