The economists receive the award “for having explained economic growth driven by innovation.”
The 2025 Nobel Prize in Economics was awarded this Monday to Joel Mokyr, Philippe Aghion and Peter Howitt “for having explained economic growth driven by innovation.”
Half of the prize goes to Mokyr “for having identified the prerequisites for sustained growth through technological progress”; while the other half is for Aghion and Howitt “by the theory of sustained growth through creative destruction.”
Sustained growth, awarded the Nobel Prize in Economics
Mokyr used historical sources to discover the causes of sustained growth, which is becoming the new normal. He showed that, For innovations to happen in a self-generated process, we not only need to know that something works, but also have scientific explanations as to why. The latter were often lacking before the industrial revolution, making it difficult to develop from new discoveries and inventions. He also emphasized the importance of society being open to new ideas and allowing change.
Aghion and Howitt also studied the mechanisms of sustained growth. In a 1992 article, they constructed a mathematical model for so-called creative destruction: when a new and improved product enters the marketcompanies that sell older products lose out. Innovation represents something new and is therefore creative. However, it is also destructive, as the company whose technology becomes obsolete is overtaken by the competition.
In different ways, the winners demonstrate how creative destruction generates conflicts that must be managed constructively. Otherwise, innovation will be blocked by established companies and interest groups who risk being harmed.
“The work of the awardees demonstrates that economic growth cannot be taken for granted. We must defend the mechanisms underlying creative destruction to avoid falling into stagnation”said John Hassler, chair of the Economics Prize Committee.
Source: Ambito
