Distorted Innovation: Does the Market Get the Direction of Technology Right?

This paper is based on the American Economic Association Distinguished Lecture delivered in New Orleans, January 2023. I thank Ufuk Akcigit, David Autor, Rena Conti, Joe Doyle, Michael Greenstone, Simon Johnson, Chad Jones, Amy Finkelstein, Will Rafey, Dani Rodrik and John Van Reenan for very useful comments, discussions and references. I am grateful to Juanita Jaramillo, Shinnosuke Kikuchi, Fredric Kong, and Todd Lensman for fantastic research assistance. Special thanks are due to David Hemous, Ralf Martin, Jacob Moscona and John Van Reenen for sharing data and help with the empirical work reported in this paper. Last but not least, this work heavily draws on joint work with several co-authors. I am particularly grateful to Ufuk Akcigit, David Autor, Simon Johnson, Pascual Restrepo and Fabrizio Zilibotti for their enduring contributions to my knowledge and understanding on these topics. All remaining errors are of course my own. I gratefully acknowledge generous financial support from the Hewlett Foundation. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.