Working Paper: CEPR ID: DP18339
Authors: Larry Samuelson; Jakub Steiner
Abstract: We examine a stochastic growth process that can alternatively be interpreted as a model of economic growth, financial portfolio management, statistical inference, or biological population growth. For the economic interpretation, we find that the growth-maximizing policy satisfies a meritocracy principle: it minimizes the discrepancy between the resource shares allocated to the agents and the agents' ``merits.'' For the statistical interpretation, the setting is equivalent to a model of predictive coding, in which a misspecified system maximizes the fit of data. A consistency principle analogous to the meritocracy principle requires the optimal fit to minimize a degree of Bayes inconsistency.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| wealth allocation (G11) | individual merit (I24) |
| large deviations in wealth accumulation (D31) | stochastic growth (O49) |
| increases in productivity (O49) | favorable allocation of resources (D61) |
| favorable allocation of resources (D61) | enhanced growth (O40) |
| increases in productivity (O49) | growth-maximizing policy (L21) |
| growth-maximizing policy (L21) | resource allocation (H61) |