The Macroeconomic Transition of Technological Capital in the Age of Automation

Throughout the twentieth century, human labor was the primary driver of economic expansion, with capital serving as a supplement. But the emergence of digital automation, robots, and artificial intelligence (AI) has significantly upset this equilibrium. Once associated with the creation of jobs, investment now frequently results in the displacement of workers as technical capital replaces human labor. The study focuses on the recent conversion of the classical production function, which is typically expressed as Y = f(L, K, T, E), into what is known as the modern K_T, a technological capital-dominated conversion. According to the analysis, as productivity rises, labor's contribution to employment and wages decreases, leading to social and budgetary imbalances. In addition to endangering the viability of PAYG (Pay-as-you-go) pension plans and enhancing state finances, these structural shifts force politicians to reconsider taxation, redistribution, and the social compact in a world where the creation of economic value is less dependent on human labor. Received: 02 December 2025 / Accepted: 31 December 2025 / Published: January 2026