We present the LLM Economist, a novel framework that uses agent-based modeling to design and assess economic policies in strategic environments with hierarchical decision-making. At the lower level, bounded rational worker agents -- instantiated as persona-conditioned prompts sampled from U.S. Census-calibrated income and demographic statistics -- choose labor supply to maximize text-based utility functions learned in-context. At the upper level, a planner agent employs in-context reinforcement learning to propose piecewise-linear marginal tax schedules anchored to the current U.S. federal brackets. This construction endows economic simulacra with three capabilities requisite for credible fiscal experimentation: (i) optimization of heterogeneous utilities, (ii) principled generation of large, demographically realistic agent populations, and (iii) mechanism design -- the ultimate nudging problem -- expressed entirely in natural language. Experiments with populations of up to one hundred interacting agents show that the planner converges near Stackelberg equilibria that improve aggregate social welfare relative to Saez solutions, while a periodic, persona-level voting procedure furthers these gains under decentralized governance. These results demonstrate that large language model-based agents can jointly model, simulate, and govern complex economic systems, providing a tractable test bed for policy evaluation at the societal scale to help build better civilizations.

--Economic inequality is a global challenge, intensifying disparities in education, healthcare, and social stability. Traditional systems like the U.S. federal income tax reduce inequality but lack adaptability. Although models like the Saez Optimal T axation adjust dynamically, they fail to address taxpayer heterogeneity and irrational behavior . This study introduces T axAgent, a novel integration of large language models (LLMs) with agent-based modeling (ABM) to design adaptive tax policies. In our macroeconomic simulation, heterogeneous H-Agents (households) simulate real-world taxpayer behaviors while the T axAgent (government) utilizes LLMs to iteratively optimize tax rates, balancing equity and productivity. Benchmarked against Saez Optimal T axation, U.S. federal income taxes, and free markets, T axAgent achieves superior equity-efficiency tradeoffs. This research offers a novel taxation solution and a scalable, data-driven framework for fiscal policy evaluation. Economic inequality is a critical global issue with profound social, political, and economic impacts. Research highlights its detrimental effects on education, healthcare, political stability, and economic growth[1, 2, 3].

The legislative process is the backbone of a state built on solid institutions. Yet, due to the complexity of laws -- particularly tax law -- policies may lead to inequality and social tensions. In this study, we introduce a novel prototype system designed to address the issues of tax loopholes and tax avoidance. Our hybrid solution integrates a natural language interface with a domain-specific language tailored for planning. We demonstrate on a case study how tax loopholes and avoidance schemes can be exposed. We conclude that our prototype can help enhance social welfare by systematically identifying and addressing tax gaps stemming from loopholes.

The use of artificial intelligence (AI) in the public sector is best understood as a continuation and intensification of long standing rationalization and bureaucratization processes. Drawing on Weber, we take the core of these processes to be the replacement of traditions with instrumental rationality, i.e., the most calculable and efficient way of achieving any given policy objective. In this article, we demonstrate how much of the criticisms, both among the public and in scholarship, directed towards AI systems spring from well known tensions at the heart of Weberian rationalization. To illustrate this point, we introduce a thought experiment whereby AI systems are used to optimize tax policy to advance a specific normative end, reducing economic inequality. Our analysis shows that building a machine-like tax system that promotes social and economic equality is possible. However, it also highlights that AI driven policy optimization (i) comes at the exclusion of other competing political values, (ii) overrides citizens sense of their noninstrumental obligations to each other, and (iii) undermines the notion of humans as self-determining beings. Contemporary scholarship and advocacy directed towards ensuring that AI systems are legal, ethical, and safe build on and reinforce central assumptions that underpin the process of rationalization, including the modern idea that science can sweep away oppressive systems and replace them with a rule of reason that would rescue humans from moral injustices. That is overly optimistic. Science can only provide the means, they cannot dictate the ends. Nonetheless, the use of AI in the public sector can also benefit the institutions and processes of liberal democracies. Most importantly, AI driven policy optimization demands that normative ends are made explicit and formalized, thereby subjecting them to public scrutiny and debate.

Whether they are called manifestos or contracts, the documents published by political parties ahead of an election are rather less substantial than their many pages would suggest. They are full of best-case scenarios, undetailed proposals and dubious costings, and it is hard to picture the impact each party would have on the UK if they followed through with their pitches. So I've been feeding party literature into the political strategy video game Democracy 4, to see how these policies might play out. The results were … well, you'll see. Democracy 4 lets you play out your political fantasies (or nightmares) to see the impact of your choices and, ultimately, if you can get re-elected.

While AI is poised to disrupt our work and lives, these technologies can be harnessed through wise regulation. So rather than replacing individuals, much AI should assist them in completing tasks that are more fulfilling, or by augmenting work that is often classified as professional. "Artificial intelligence (AI) has a proper substitutive role – it can ensure that difficult, dirty and dangerous work is done more and more by machines and less and less by human beings," says Professor Frank Pasquale from Brooklyn Law School."But Should people be taking more courses like computer science or technical fields that will help them understand AI better? "Yes, but I don't think they should replace existing courses.

Court documents released in August revealed that Swiss tax officials are investigating art dealer and freeport magnate Yves Bouvier for allegedly concealing CHF 330 million in profits. The Swiss authorities believe that Bouvier used a fictitious residence in Singapore to evade taxes in his home country, and confiscated one of Bouvier's properties, reportedly worth CHF 4.5 million, as a pledge while they continue investigating his finances. The investigation, however, was nearly derailed in its early stages due to a single vulnerable tax official. An escort girl known only as Sarah has testified that in September 2017, Yves Bouvier sent her to a conference to seduce a key official with Switzerland's Federal Tax Administration. Sarah's honeypot adventure took place mere months after Swiss tax officials had begun looking into Bouvier's finances.

Tax policy analysis is a well-developed field with a robust body of research and extensive modeling infrastructure across think tanks and government agencies. Because tax policy affects everyone, and especially wealthy people, it gets both a lot of attention and research funding (notably from individual foundations like those of Peter G. Peterson and Koch brothers). In addition to empirical studies, organizations like the Urban-Brookings Tax Policy Center and the Joint Committee on Taxation produce microsimulations of tax policy to comprehensively model thousands of levers of policymaking. However, because it is difficult to guess how people will react to changing public policy scenarios, these models are limited in how much they account for individual behavioral factors. Although it is far from certain, artificial intelligence (AI) might be able to help address this notable deficiency in tax policy, and recent work has highlighted this possibility.

The demand for AI continues to increase according to forecasts by International Data Corporation. Enterprises will adopt AI in 2020 with an estimated 16% surge compared to previous years. Diversity is enabling the growth of AI as companies rely on AI for decision-making with bias incidents reducing according to the IDC report. The customer experience from AI is growing as enterprises analyze interactions, and respond to queries in real-time. Automated AI systems are offering customer support, an area humans have faced challenges because of physical limitations.

Our work fits within a larger context of recent advances in RL. RL has been used to train AIs to win competitive games, such as Go, Dota, and Starcraft. In those settings, the RL objective is inherently adversarial ("beat-the-other-team"). Machine learning has also been used for the design of auction rules. In this work, we instead focus on the opportunity to use AI to promote social welfare through the design of optimal tax policies in dynamic economies. Many studies have shown that high income inequality can negatively impact economic growth and economic opportunity.