The 2025 Nobel Memorial Prize in Economic Sciences has been awarded to Joel Mokyr, Philippe Aghion, and Peter Howitt for their groundbreaking work explaining how technological innovation drives sustained economic growth. Their research illuminates the historical and theoretical underpinnings of how societies transition from stagnation to prosperity, a phenomenon that has dramatically improved living standards worldwide.
Key Takeaways
- Technological progress is a primary driver of sustained economic growth.
- Societies must be open to new ideas and embrace disruptive change.
- "Creative destruction," where new innovations replace old ones, is essential for economic advancement.
- Government policies play a crucial role in fostering innovation and growth.
The Historical Roots of Growth
Joel Mokyr, recognized for his historical analysis, was awarded half the prize for detailing how sustained economic growth became the norm, particularly since the Industrial Revolution. He emphasizes that for innovations to become self-perpetuating, societies need not only scientific breakthroughs but also a populace capable of understanding and implementing them. Mokyr highlights the Enlightenment’s role in fostering a culture of inquiry and practical application, with Britain serving as an early epicenter due to its operationalization of scientific ideas within the economy through skilled mechanics and entrepreneurs. He also points to the importance of open political institutions that can accommodate disruptive changes.
The Theory of Sustained Growth
Philippe Aghion and Peter Howitt shared the other half of the prize for developing a mathematical model centered on "creative destruction." This concept, originally associated with Joseph Schumpeter, describes the continuous process where new technologies, products, and businesses emerge, rendering older ones obsolete. Their work demonstrates how economic growth can persist even as established firms decline, underscoring the necessity of this dynamic for long-term prosperity. Their research offers valuable insights for policymakers aiming to foster research and development.
Implications for the Modern Economy
The laureates’ work carries significant relevance in the current era of rapid technological advancement, particularly with the rise of artificial intelligence. They caution against policies that could stifle innovation and economic growth, such as protectionism, trade barriers, and restrictions on immigration. The economists stress that a supportive environment, where governments prioritize science and technology and encourage collaboration between academia and industry, is crucial for continued progress. They advocate for openness and adaptability as key factors for societies to harness the potential of new technologies and address global challenges like climate change and aging populations.
Sources
- A Nobel Prize for explaining when technology leads to growth : NPR, NPR.
- Joel Mokyr, Philippe Aghion and Peter Howitt Share Nobel in Economics, The New York Times.
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