Economics

CREST at the IP Paris IA Action Summit: Exploring AI for Economic Forecasting and Algorithmic Optimization

On February 6, 2025, Institut Polytechnique de Paris hosted the IA Action Summit at École polytechnique, a high-level event bringing together leading researchers, industry experts, and policymakers to discuss the transformative role of artificial intelligence. Among the distinguished participants, Anna Simoni and Vianney Perchet, researchers at CREST, presented their latest work on AI applications in macroeconomic forecasting and algorithmic optimization, respectively.

Macroeconomic Nowcasting with AI and Alternative Data – Anna Simoni

Anna Simoni (CNRS, ENSAE Paris, École polytechnique, Hi!Paris Fellow), presented her work on integrating artificial intelligence and alternative data to improve macroeconomic nowcasting. She addressed the challenge of forecasting key economic indicators such as GDP growth, inflation, and financial cycles in real time—an essential task for policymakers, financial institutions, and businesses.

Her research highlights the potential of AI to handle large, complex, and mixed-frequency datasets from both traditional (e.g., national statistics, financial markets) and non-traditional sources (e.g., Google search data, satellite imagery, mobile phone traffic, credit card transactions). By applying machine learning techniques, including dynamic factor models, neural networks, and Bayesian methods, her work demonstrates how AI-driven models can enhance nowcasting accuracy, detect economic shifts early, and provide better insights into economic trends.

Through real-world applications, including an analysis of Google search data for GDP nowcasting, her findings reveal that AI methods can significantly improve short-term economic predictions, especially in periods of high uncertainty or economic recessions. However, she also emphasized that AI models must be carefully designed to ensure interpretability and reliability, as pure data-driven approaches do not always outperform traditional methods.

AI-Powered AI: Enhancing Algorithmic Decision-Making – Vianney Perchet

Vianney Perchet, (GENES, Hi!Paris Fellow), introduced the concept of AI-powered AI, where artificial intelligence assists and improves algorithmic decision-making in various fields, from optimization to reinforcement learning and recommender systems.

He explored how AI-oracles—AI systems that provide tentative solutions to computational tasks—can be leveraged to accelerate decision-making processes. Through examples like binary search with AI hints, he demonstrated the trade-offs between consistency and robustness: algorithms must be able to trust AI-generated predictions when they are accurate but remain resilient when faced with imperfect or misleading information.

Perchet highlighted several fundamental challenges in AI-assisted algorithms, including:

  • Strategic AI usage: AI-oracle calls can be costly, requiring efficient selection mechanisms.
  • Combination of multiple AI sources: Different AI models may offer varying predictions, requiring aggregation methods to improve reliability.
  • Incentivization: AI models may have their own objectives, necessitating mechanisms to align them with user needs.
  • Learning from structure: AI-assisted algorithms must adapt and refine predictions over time for better long-term performance.
  • Beyond worst-case scenarios: Moving beyond rigid worst-case analyses toward realistic, instance-dependent performance guarantees.

His research opens exciting new perspectives for integrating AI into optimization problems, online learning, and algorithmic decision-making, with applications ranging from robotics and computer vision to financial forecasting and recommender systems.

CREST’s Commitment to AI Research

CREST’s involvement in the IP Paris IA Action Summit, through the contributions of Anna Simoni and Vianney Perchet,demonstrates the lab’s strong engagement in artificial intelligence research applied to economics, forecasting, and decision-making. Their work aligns with ongoing research at CREST on machine learning, reinforcement learning, and statistical AI methods, led by scholars such as Nicolas Chopin, Paola Tubaro, Bruno Crépon, and Olivier Gossner.

As AI continues to transform economic modeling and optimization, CREST continues its research of exploring how AI can enhance forecasting, decision processes, and strategic learning in uncertain environments.

Exploring Political and Economic Dynamics: A Conference with Guido Tabellini

On February 10, 2025, CREST and Institut Polytechnique de Paris partnered with ENSAE Paris and the AGORA association from ENSAE Paris to organize a scientific conference in honor of Guido Tabellini, a distinguished professor from Bocconi University. This event brought together researchers and students for an engaging discussion on key economic and political science issues shaped by Tabellini’s work.

The conference featured a series of presentations and discussions, highlighting Tabellini’s contributions to political economy, economic institutions, and policy-making. The event provided a unique opportunity for young researchers and students to interact with a leading figure in the field, fostering an enriching intellectual exchange.

Presentation: The Clan and the Corporation

Before starting his presentation, the conference began with Arnaud Pandevant, a current PhD student from CREST-École polytechnique who introduced Guido Tabeliini’s curriculum and research activities.

During the conference, Guido Tabellini presented his forthcoming Princeton University Press book “Two Paths to Prosperity: Culture and Institutions in Europe and China, 1000-2000” This work, developed with Avner Greif and Joel Mokyr, explores the historical divergence in economic and institutional development between China and Europe over the past millennium.

Tabellini examined how social organizations inherited from religious beliefs shaped economic outcomes, emphasizing the distinction between clans—which dominated local governance in China—and corporations, which played a key role in Europe’s economic and political development. His presentation traced how these social structures influenced state formation, governance, and innovation, ultimately contributing to the “Great Divergence” that saw Europe industrialize ahead of China.

His research delves into the impact of kinship-based networks in China that sustained local cooperation but limited institutional flexibility, while Europe’s associational culture, built on corporate institutions like guilds, universities, and self-governing cities, fostered economic dynamism and state capacity.

Seminar on “Disengaging from Reality: Online Behavior and Unpleasant Political News”

In addition to the conference, Guido Tabellini continued his engagement at CREST with a seminar on February 11, 2025, presenting his latest research titled: “Disengaging from Reality, Online Behavior and Unpleasant Political News.”

This study explores why, despite scandals and misconduct, partisan supporters often remain loyal to their favored political candidates. Tabellini and his co-author, Leonardo D’Amico (PhD candidate at Harvard University), analyze online engagement with negative political news during the 2016 U.S. Presidential Election. Their findings reveal that partisan users are more likely to ignore negative news about their preferred candidate while actively seeking out such news about their opponent—a behavior they define as a political “ostrich effect.”

Furthermore, when partisans do engage with unfavorable news about their own candidate, they tend to rationalize the behavior, react negatively, and frequently cite scandals of the opposing candidate as a form of counterargument. This behavior aligns with a model in which individuals experience psychological discomfort when exposed to dissonant information while finding pleasure in reaffirming their own beliefs.

Importantly, the study highlights how social media platforms exacerbate ideological segregation by amplifying users’ pre-existing biases. Since online interactions provide positive reinforcement for confirming one’s own views, these platforms become echo chambers that discourage engagement with opposing perspectives.

A Thought-Provoking Discussion

Both the conference and seminar sparked lively discussions among participants, emphasizing the broader implications of Tabellini’s research on political behavior, digital media, and democratic accountability. The findings resonate with contemporary debates on misinformation, polarization, and the role of social networks in shaping political discourse.

CREST, Institut Polytechnique de Paris, ENSAE Paris, and AGORA were honored to host Guido Tabellini and look forward to continuing collaborations that advance the understanding of economic and political dynamics in the digital age.

Florian Grosset for VoxTalks Economics: Can planting trees change the climate?

Florian Grosset-Touba interviewed by Tim Phillips

Recorded at the CEPR Paris Symposium. At COPs or the WEF, we regularly hear about ambitious tree-planting initiatives. These massive programs have been praised as a way to motivate entire communities to join the fight against climate change, but do we know what their impact on the environment or the economy would be? An ingenious piece of research that evaluates a century-old environmental policy in the US gives us a valuable new insight into what planting trees, if done carefully, can achieve. Florian Grosset-Touba spoke to Tim Phillips about the history of tree-planting programmes, where and how to plant them, and the potential impact on the climate and the economy.

7 Feb 2025