The Nobel Prize in Economic Sciences 2025
This prestigious award was given to Joel Mokyr, Philippe Aghion, and Peter Howitt for their contributions to understanding "innovation-driven economic growth".
- Joel Mokyr received half the prize for his work on the role of technological innovation in sustained economic growth.
- The other half went to Philippe Aghion and Peter Howitt for their development of a mathematical model of 'creative destruction'.
Innovation-Driven Economic Growth
This theory suggests that a nation's long-term growth hinges on its capacity to innovate. Originally highlighted by Joseph Schumpeter, technological innovation is seen as a key growth driver. Modern frameworks like endogenous growth theory consider innovation as an internal force in sustaining long-term economic expansion.
Joel Mokyr: Linking Science and Progress
Mokyr emphasized the reciprocal relationship between scientific discoveries and technological advancements, which drives economic growth. For this cycle to work, societies must be open to new ideas and change.
Creative Destruction
Coined by Joseph Schumpeter, creative destruction refers to the process where new innovations replace old ones, disrupting and creating markets. Examples include wireless communication replacing wired telephones, leading to new markets like mobile internet.
Aghion and Howitt: The Mathematics of Innovation
Their 1992 model formalized how companies drive growth by innovating better products. This model explains how innovation can both create and destroy value, keeping economies dynamic.
Global Growth Post-1800
Mokyr pointed out that consistent economic growth began post-1800, particularly in industrial Britain, where open exchanges between innovators fostered progress.
Beyond GDP: Redefining Progress
While GDP has been a traditional measure, real progress also includes qualitative improvements such as new medicines, safer transportation, and cleaner energy.
Growth Isn't Automatic
The research indicates reasons why growth can stall, such as technological monopolies, restricted academic research, and resistance to change. Mokyr suggests technologies like AI could enhance innovation, but warns of challenges like pollution and inequality.
Protecting Progress
The key message is that economic growth shouldn't be taken for granted, as stagnation was historically the norm. Growth depends on openness to ideas and competition; otherwise, the "machine" of creative destruction could stop, halting progress.
