the " long and variable lags " between policy actions and the economic effects. economists agree that monetary policy cannot " fine tune " the economy to ensure that the full employment objective is continuously maintained. however, a considerable amount of research supports the contention that monetary policy can reduce the variability of output around its full - employment level. for a discussion of the case for price stability, see fischer ( 1996 ). much of this research involves simulations of empirical macroeconomic models with alternative policy rules. the simple policy rules used in these exercises mimic the systematic aspects of the response of discretionary policy to changes in the macroeconomy. for example, taylor has shown that federal reserve policy actions in recent years have been broadly similar to what a simple policy rule would have prescribed. these exercises therefore demonstrate the ability of simple rules – and by extension, discretionary monetary policy more broadly – to both reduce the variability of output and achieve a long - run inflation target. see taylor ( 1999 ) for a series of papers involving simulations of models with various policy rules. preferences households and businesses are presumed to prefer low and stable inflation to high and variable inflation. but they also prefer high and rising real income per capita and output that is consistently close to the economy's maximum sustainable level of output. this is often expressed in terms of a loss function where the loss to society is expressed as a weighted average of squared deviations of inflation from its target and of output from its potential level. the squaring of the deviations ensures that deviations on either side of the target are treated equivalently as losses. the weights, a and 1 - a, indicate the relative intensity of the public's distaste for deviating from their preferred rates of inflation and output. the loss to society, l, can be expressed as ( 1 ) l = a ( f - f * ) + ( 1 - a ) ( y - y * ) where f is the rate of inflation, f * is the target rate of inflation, y is the level of output and y * is the target level of output or potential output. tradeoff between inflation and output variability although it is possible in principle to achieve price stability and full employment simultaneously, an inevitable tradeoff between the variability of output and the variability of inflation exists. this tradeoff is most obvious in the case of a supply shock, for example an abrupt increase in the price of oil. an adverse supply shock typically raises inflation and lowers aggregate demand ( by reducing the

habits, may be combined in ways that indicate race, gender, and other protected characteristics. 15 even after one online platform implemented new safeguards pursuant to a settlement to address the potential exclusion of consumers from seeing ads for credit products based on race, gender, or other protected characteristics, professor alan mislove and his collaborators have found that the complex algorithms may still result in bias and exclusion. 16 therefore, it is important to understand how complex data interactions may skew the outcomes of algorithms in ways that undermine fairness and transparency. makada henry - nickie, notes that “ … [ i ] t is of paramount importance that policymakers, regulators, financial institutions, and technologists critically examine the benefits, risks, and limitations of ai and proactively design safeguards against algorithmic harm, in keeping with societal standards, expectations, and legal protections. ” 17 i am pleased that the symposium includes talks from scholars who are studying how we can design ai models that avoid bias and promote financial inclusion. no doubt everyone here today who is exploring ai wants to carol a. evans and westra miller, “ from catalogs to clicks : the fair lending implications of targeted, internet marketing, ” consumer compliance outlook, third issue, 2019, https : / / www. consumercomplianceoutlook. org / 2019 / third - issue / from - catalogs - to - clicks - the - fair - lendingimplications - of - targeted - internet - marketing /. piotr szapiezynski et al., “ algorithms that ‘ don ’ t see color ’ : comparing biases in lookalike and special ad audiences, ” ( 2019 ), https : / / sapiezynski. com / papers / sapiezynski2019algorithms. pdf ; till speicher, et al., “ potential for discrimination in online targeted advertising, ” proceedings of machine learning research 81 : 1 – 15, 2018 conference on fairness, accountability, and transparency, http : / / proceedings. mlr. press / v81 / speicher18a / speicher18a. pdf. makada henry - nickie, “ equitable algorithms : examining ways to reduce ai bias in financial services ” ( testimony before the house committee on financial services task force on artificial intelligence hearing on february 12, 2020 ), https : / / www. congress. gov / 116 / meeting / house / 110499 / witnesses / hhr