Steering Technological Progress

Rapid progress in new technologies such as AI has led to widespread anxiety about adverse labor market impacts. This paper asks how to guide innovative efforts so as to increase labor demand and create better-paying jobs while also evaluating the limitations of such an approach. We develop a theoretical framework to identify the properties that make an innovation desirable from the perspective of workers, including its technological complementarity to labor, the relative income of the affected workers, and the factor share of labor in producing the goods involved. Applications include robot taxation, factor-augmenting progress, and task automation. In our framework, the welfare benefits of steering technology are greater the less efficient social safety nets are. As technological progress devalues labor, the welfare benefits of steering are at first increased but, but beyond a critical threshold, decline and optimal policy shifts toward greater redistribution. Moreover, as labor's economic value diminishes, steering progress focuses increasingly on enhancing human well-being rather than labor productivity.