Automation, Power, and Profit: A Critique and Generalization of the Task‐Based Approach

ABSTRACT The task‐based approach has become the dominant paradigm for explaining changes in U.S. income inequality. However, many of its predictions are reformulations of accounting identities. To address this limitation, I embed the task‐based approach within a broader theoretical structure that avoids conflating behavioral relationships with accounting constraints. Building on a game‐theoretic framework in which unions, automation, and welfare policy jointly determine worker power, the model gauges the roles of technology and institutions in shaping macroeconomic outcomes. Calibrated to U.S. data, the model demonstrates that automation alone cannot explain the behavior of profits, unemployment, and inequality without accounting for institutional changes.