TaxAI: A Dynamic Economic Simulator and Benchmark for Multi-Agent Reinforcement Learning

TL;DR

TaxAI is a large-scale, realistic multi-agent reinforcement learning environment simulating economic interactions among households, government, firms, and intermediaries, enabling better policy testing and development.

Contribution

The paper introduces TaxAI, a scalable, realistic MARL-based economic simulator based on the Bewley-Aiyagari model, and benchmarks its effectiveness against traditional methods.

Findings

MARL outperforms traditional economic methods in the TaxAI environment.

TaxAI can simulate interactions with up to 10,000 households.

The simulator demonstrates superior scalability and realism for policy analysis.

Abstract

Taxation and government spending are crucial tools for governments to promote economic growth and maintain social equity. However, the difficulty in accurately predicting the dynamic strategies of diverse self-interested households presents a challenge for governments to implement effective tax policies. Given its proficiency in modeling other agents in partially observable environments and adaptively learning to find optimal policies, Multi-Agent Reinforcement Learning (MARL) is highly suitable for solving dynamic games between the government and numerous households. Although MARL shows more potential than traditional methods such as the genetic algorithm and dynamic programming, there is a lack of large-scale multi-agent reinforcement learning economic simulators. Therefore, we propose a MARL environment, named \textbf{TaxAI}, for dynamic games involving $N$ households, government, firms, and financial intermediaries based on the Bewley-Aiyagari economic model. Our study benchmarks 2 traditional economic methods with 7 MARL methods on TaxAI, demonstrating the effectiveness and superiority of MARL algorithms. Moreover, TaxAI's scalability in simulating dynamic interactions between the government and 10,000 households, coupled with real-data calibration, grants it a substantial improvement in scale and reality over existing simulators. Therefore, TaxAI is the most realistic economic simulator for optimal tax policy, which aims to generate feasible recommendations for governments and individuals.