2025 Nobel Prize in Economics awarded to Joel Mokyr, Philippe Aghion and Peter Howitt

The 2025 Nobel Prize in Economic Sciences has been awarded to Joel Mokyr, Philippe Aghion, and Peter Howitt for their contribution in innovation-driven economic growth. Mokyr's share recognises his work on technological progress, while Aghion and Howitt are honoured for their theory on creative destruction.

The official handle of Nobel Prize in a post informed, “The Royal Swedish Academy of Sciences has decided to award the 2025 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel to Joel Mokyr, Philippe Aghion and Peter Howitt “for having explained innovation-driven economic growth” with one half to Mokyr “for having identified the prerequisites for sustained growth through technological progress” and the other half jointly to Aghion and Howitt “for the theory of sustained growth through creative destruction.”

What are the contributions of Mokyr, Aghion and Howitt?

Technology advances are typically believed to impact everyone rapidly, continuously replacing old products and methods with new ones. This ongoing cycle drives sustained economic growth, leading to improvements in living standards, health, and overall quality of life across the world.

However, this was not always true. In fact, stagnation was the default for most of human history. Although there were occasional significant discoveries that occasionally improved living standards and increased incomes, growth generally plateaued after some time, the Nobel Prize Committee noted.

Joel Mokyr analysed historical sources to understand how sustained growth became the norm. He showed that for innovations to succeed in a self-sustaining cycle, it's not enough to know that something works, scientific explanations are also necessary. Before the industrial revolution, such explanations were often missing, hindering further development of new discoveries and inventions. He also highlighted the crucial role of an open society receptive to new ideas and change.

Meanwhile, Philippe Aghion and Peter Howitt explored the mechanisms of sustained growth. In their 1992 article, they developed a mathematical model of creative destruction, which is the process where the introduction of a new, superior product causes the decline of companies selling outdated products. Innovation is considered creative because it introduces something new, but it is also destructive because the company with obsolete technology is driven out of the market.