The 2025 Nobel Prize in Economic Sciences has been awarded jointly to Joel Mokyr, Philippe Aghion, and Peter Howitt for their groundbreaking research explaining innovation-driven economic growth.​
The Laureates and Their Contributions

• Joel Mokyr (Northwestern University, USA, and Tel Aviv University, Israel) received half of the prize for identifying the prerequisites for sustained growth through technological progress.
• Philippe Aghion (Collège de France, INSEAD, and LSE) and Peter Howitt (Brown University, USA) shared the other half for their theory of sustained growth through creative destruction.

Joel Mokyr’s Contribution
Core Contributions

• Mokyr identified the essential role of technological innovation and the scientific understanding underpinning it, showing that before the Industrial Revolution, growth was often stunted due to a lack of scientific rationale and mechanisms for building upon prior discoveries.​
• He established the importance of a culture and institutions that promote and diffuse useful knowledge, encouraging societies to embrace new ideas and adapt to change.​
• Mokyr's analysis demonstrated that sustained economic growth arises only when innovation is systematically supported and integrated into economic and social structures.​

 Importance and Impact

• Mokyr’s work helps explain why modern economies have experienced unprecedented and continuous growth over the past two centuries, as opposed to the stagnation that characterized most of human history.​
• His research underscores the fragility of economic progress and the necessity to maintain and foster innovation-friendly environments; policies that hinder the flow of ideas and technological change can stall or even reverse these gains.​
• The Nobel committee recognized Mokyr’s research as a key to understanding not just how growth is achieved, but also how it can be threatened and requires active cultivation.​
• Joel Mokyr shared this Nobel honour with Philippe Aghion and Peter Howitt, who were recognized for their mathematical modeling of innovation-driven growth through the process of creative destruction, together providing a comprehensive understanding of the mechanisms behind innovation-led economic progress.

Aghion & Howitt’s Framework of Creative Destruction
In the early 1990s, provided the first rigorous macroeconomic model describing how innovation leads to the continual replacement of outdated products and production methods with new, superior ones—a process that both drives economic expansion and creates new challenges around employment and social adaptation.​

Core Elements of Aghion & Howitt’s Creative Destruction Framework

• Creative destruction, rooted in Schumpeter’s insights, is defined as an ongoing process whereby new innovations disrupt and replace existing technologies or business structures, fueling long-term economic growth.​
• Their endogenous growth model mathematically formalizes how competition and innovation combine to ensure that economies do not stagnate, but instead generate higher productivity and better living standards over time.​
• Aghion and Howitt’s framework highlights that while creative destruction leads overall to prosperity, it also creates conflicts and frictions, as those who benefit from existing technologies or business models may resist change, requiring proactive policy to manage transition and inclusivity.​

Nobel Prize Recognition and Broader Impact

• The Royal Swedish Academy of Sciences recognized their contribution as crucial in explaining modern, innovation-driven growth—a phenomenon largely absent in human history until the past two centuries.​
• Their research illustrates that economic growth is not automatic but must be nurtured through the right mix of competitive markets, scientific progress, and forward-looking policy.​
• The 2025 prize was shared: Joel Mokyr received the other half for identifying historical and institutional prerequisites for sustained innovation; Aghion and Howitt were honored specifically for their creative destruction theory and its policy implications.​

Contemporary Relevance

• Their theoretical model helps policymakers, businesses, and societies navigate contemporary disruptions like those caused by artificial intelligence, climate transitions, and technological change, emphasizing the importance of supporting adaptive policies for affected workers and industries.​
• The Nobel committee stressed that societies must remain vigilant in supporting the sources of innovation and competition to sustain prosperity and manage the social costs of creative destruction.​

Relevance of Nobel Laureates’ Work to Current Policy Debates

The laureates' work is highly relevant to ongoing economic policy debates worldwide, including in India:

• Innovation and Competition Policies: The theory emphasizes fostering competition and innovation while preventing monopolistic dominance, especially with rising technologies like artificial intelligence. Policies need to ensure that dominant firms do not block new entrants, preserving incentives for creative destruction and growth.​
• Globalization and Trade: The laureates caution against protectionist tariffs and deglobalization, which can shelter incumbent firms from competition and stifle innovation. Their findings support policies favoring openness to trade and ideas as prerequisites for sustainable economic development.​
• Sustainability and Green Transition: Innovation in sustainable energy and technology is necessary to address environmental challenges. However, monetary policies raising interest rates may disproportionately affect smaller innovative firms, suggesting a careful balance of economic and environmental goals in policy design.​
• Social and Industrial Policy: The research advocates for government support in innovation subsidies and worker retraining to adapt to rapidly changing economic landscapes, ensuring political and social backing for growth-oriented policies.​

This Nobel-winning framework provides policymakers with essential insights on nurturing innovation ecosystems, balancing competition with regulation, and aligning economic growth with social and environmental sustainability.​
In summary, the work of the 2025 Nobel laureates highlights that economic growth is not automatic but requires active governance to support innovation, healthy competition, openness, and social adaptation—all central themes in current global and Indian economic policy debates.
 

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