Artificial Intelligence and the Economics of Decision-Making

Wim Naudé

No 16000, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Artificial Intelligence (AI) scientists are challenged to create intelligent, autonomous agents that can make rational decisions. In this challenge, they confront two questions: what decision theory to follow and how to implement it in AI systems. This paper provides answers to these questions and makes three contributions. The first is to discuss how economic decision theory – Expected Utility Theory (EUT) – can help AI systems with utility functions to deal with the problem of instrumental goals, the possibility of utility function instability, and coordination challenges in multi-actor and human-agent collectives settings. The second contribution is to show that using EUT restricts AI systems to narrow applications, which are "small worlds" where concerns about AI alignment may lose urgency and be better labelled as safety issues. This papers third contribution points to several areas where economists may learn from AI scientists as they implement EUT. These include consideration of procedural rationality, overcoming computational difficulties, and understanding decision-making in disequilibrium situations.

Keywords: economics; artificial intelligence; expected utility theory; decision-theory (search for similar items in EconPapers)
JEL-codes: C45 C60 D01 O33 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2023-03
New Economics Papers: this item is included in nep-big, nep-cmp, nep-mic and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://docs.iza.org/dp16000.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp16000

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().