The Directions of Technical Change
Miklos Koren, Zsofia Barany, Ulrich Wohak
TL;DR
A high-dimensional model of AI adoption in which a worker uses a tool when it raises their output, which nests most existing task-based models of technical change.
Abstract
Generative AI is directional: it performs well in some task directions and poorly in others. Knowledge work is directional and endogenous as well: workers can satisfy the same job requirements with different mixes of tasks. We develop a high-dimensional model of AI adoption in which a worker uses a tool when it raises their output. Both the worker and the AI tool can perform a variety of tasks, which we model as convex production possibility sets. Because the tool requires supervision from the worker's own time and attention budget, adoption is a team-production decision, similar to hiring a coworker. The key sufficient statistics are the worker's pre-AI shadow prices: these equal the output gain from a small relaxation in each task direction, and they generally differ from the worker's observed activity mix. As AI capability improves, the set of adopted directions expands in a cone centered on these autarky prices. Near the entry threshold, small capability improvements generate large extensive-margin expansions in adoption. The model also delivers a structured intensive margin: between the entry and all-in thresholds, optimal use is partial. We parametrize the model in a simple but flexible way that nests most existing task-based models of technical change.