Growth and likelihood

0579166 - NHU-C 2024 RIV GB eng V - Research Report
Samuelson, L. - Steiner, Jakub
Growth and likelihood.
London: Centre for Economic Policy Research, 2023. 40 s. CEPR discussion paper series, 18339. ISSN 0265-8003
Institutional support: Cooperatio-COOP
Keywords : stochastic growth * economic growth * statistical inference
OECD category: Economic Theory
https://cepr.org/publications/dp18339

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.
Permanent Link: https://hdl.handle.net/11104/0348028