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  3. American Economic Review: Insights
  4. September 2024
  5. Regulating Transformative Technologies

American Economic Review: Insights

ISSN 2640-205X (Print) | ISSN 2640-2068 (Online)

Regulating Transformative Technologies

  • Daron Acemoglu
  • Todd Lensman
American Economic Review: Insights
vol. 6, no. 3, September 2024
(pp. 359–76)
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Abstract

Transformative technologies like generative AI promise to accelerate productivity growth across many sectors, but they also present new risks from potential misuse. We develop a multisector technology adoption model to study the optimal regulation of transformative technologies when society can learn about these risks over time. Socially optimal adoption is gradual and typically convex. If social damages are large and proportional to the new technology's productivity, a higher growth rate paradoxically leads to slower optimal adoption. Equilibrium adoption is inefficient when firms do not internalize all social damages, and sector-independent regulation is helpful but generally not sufficient to restore optimality.

Citation

Acemoglu, Daron, and Todd Lensman. 2024. "Regulating Transformative Technologies." American Economic Review: Insights, 6 (3): 359–76. DOI: 10.1257/aeri.20230353

Additional Materials

JEL Classification

  • D21 Firm Behavior: Theory
  • H21 Taxation and Subsidies: Efficiency; Optimal Taxation
  • H25 Business Taxes and Subsidies including sales and value-added (VAT)
  • O31 Innovation and Invention: Processes and Incentives
  • O33 Technological Change: Choices and Consequences; Diffusion Processes