Economics Nobel 2025 to Mokyr, Aghion & Howitt for explaining innovation-led growth

Stockholm, Oct 13: The final Nobel of this year’s prize season in Economic Sciences was awarded to Joel Mokyr (Northwestern University, USA), Philippe Aghion (Collège de France and INSEAD, Paris, France), and Peter Howitt (Brown University, USA) for their groundbreaking work in explaining innovation-driven, sustained economic growth.

The Royal Swedish Academy of Sciences, announcing the “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2025”, on Monday, stated that half of the prize was awarded to Mokyr “for having identified the prerequisites for sustained growth through technological progress,” while the other half was shared jointly by Aghion and Howitt “for the theory of sustained growth through creative destruction.”

“Over the last two centuries, for the first time in history, the world has seen sustained economic growth. This has lifted vast numbers of people out of poverty and laid the foundation of our prosperity. This year’s laureates in Economic Sciences — Joel Mokyr, Philippe Aghion, and Peter Howitt — explain how innovation provides the impetus for further progress,” the Academy said in its announcement.

Mokyr combined historical research with economic analysis to uncover why sustained growth became a recurring phenomenon. He demonstrated that for innovations to occur in a self-generating, continuous process, it is not enough to know that something works — we must also understand why it works through scientific explanations.

“This kind of understanding was often missing before the Industrial Revolution, making it difficult to build upon new discoveries. Mokyr also highlighted the crucial role of societies being open to new ideas and welcoming change,” the Academy noted.

Meanwhile, Aghion and Howitt explored the mechanisms behind sustained growth through the lens of creative destruction. In a pivotal 1992 paper, they developed a mathematical model explaining how new and better products replace older ones — a process that is both creative and destructive.

When new innovations emerge, older technologies and the firms that rely on them are often rendered obsolete. This dynamic fosters growth but also creates conflicts, as established companies and interest groups may resist change to protect their positions.

“In various ways, the laureates have shown that these conflicts must be handled constructively. Otherwise, vested interests can block innovation,” the statement said.

John Hassler, Chair of the Committee for the Prize in Economic Sciences, emphasized the ongoing importance of this work:

“The laureates’ work shows that economic growth cannot be taken for granted. We must uphold the mechanisms that underlie creative destruction so we do not fall back into stagnation.”

Last year, the prize was awarded to three American economists — Daron Acemoglu and Simon Johnson of the Massachusetts Institute of Technology (MIT), and James A. Robinson of the University of Chicago — for their studies on how institutions shape prosperity and help explain the deep differences in wealth between nations.

IANS