Innovation, Growth, and the Power of Creative Destruction: The 2025 Nobel Laureates in Economics
“Progress is never calm. It thrives on disruption, creativity, and courage.” — Philippe Aghion, Nobel Laureate 2025
When the Royal Swedish Academy of Sciences announced the 2025 Nobel Prize in Economics, three familiar names echoed across academic corridors: Joel Mokyr, Philippe Aghion, and Peter Howitt. Each, in his own way, has helped redefine how we understand the driving force of modern prosperity — innovation. Together, they have reshaped the field of growth economics by explaining how societies progress not through stability, but through the restless churn of creative destruction.
Their joint recognition celebrates decades of research that explores one central idea: economic growth is not a natural consequence of capital or labour alone, but the result of human creativity constantly reinventing the world.
The Core Idea: Innovation as the Engine of Growth
At the heart of this Nobel recognition lies the theory of innovation-driven growth, which builds upon and modernizes Joseph Schumpeter’s concept of creative destruction. This process — the incessant cycle where new ideas and technologies replace old ones — forms the foundation of what economists now call endogenous growth theory.
Instead of viewing technological progress as an external or random factor, Mokyr, Aghion, and Howitt demonstrated how innovation arises from within the economic system itself. Entrepreneurs, researchers, and inventors are not peripheral players; they are the beating heart of modern economies.
Joel Mokyr: The Historian of Progress
Born in the Netherlands and now a professor at Northwestern University, Joel Mokyr has long been regarded as one of the most original thinkers in economic history. His lifelong quest has been to answer a deceptively simple question: Why did the modern world begin when and where it did?
Mokyr’s work blends history, economics, and culture to show that the Industrial Revolution was not just a mechanical transformation, but a cultural one. In his influential books — such as The Gifts of Athena (2002) and A Culture of Growth (2016) — he argued that Europe’s scientific culture, intellectual openness, and communication networks laid the groundwork for an unprecedented explosion of innovation.
According to Mokyr, ideas are the true capital of civilization. He demonstrated that societies prosper when they create environments that encourage experimentation, debate, and the free exchange of knowledge. His research traces how the Republic of Letters — an informal network of scholars and thinkers in 17th- and 18th-century Europe — created the fertile intellectual soil for industrial and technological revolutions.
In doing so, Mokyr connected historical insight to modern growth theory, suggesting that innovation flourishes only when institutions reward curiosity and tolerate failure. This perspective made him not just an economist, but a philosopher of progress — reminding us that economic growth begins in the imagination.
Philippe Aghion and Peter Howitt: The Architects of Modern Growth Theory
While Mokyr looked to history to understand innovation, Philippe Aghion and Peter Howitt built the mathematical and theoretical scaffolding that explains how innovation drives growth today.
Their collaboration began in the early 1990s, culminating in their landmark 1992 paper “A Model of Growth through Creative Destruction.” This paper — now one of the most cited works in modern economics — transformed Schumpeter’s metaphor into a rigorous model.
The Aghion-Howitt Model: Creative Destruction in Equations
In their model, economic growth arises from a constant process of technological innovation. Each new idea or product displaces an older one, raising productivity but also rendering some skills, firms, or industries obsolete.
This process is not smooth; it is disruptive by design. The Aghion-Howitt model captured how the incentives for innovation depend on competition, intellectual property rights, and the structure of markets. Too little competition can stifle creativity, while too much can erode the rewards of innovation. Balancing these forces is what determines whether an economy becomes stagnant or dynamic.
Their framework also reshaped the way policymakers view long-term growth. Instead of relying solely on macroeconomic stability or capital accumulation, Aghion and Howitt showed that innovation policy — education, research funding, and competitive markets — is the true key to sustainable prosperity.
Philippe Aghion: The Visionary of Inclusive Innovation
Aghion, born in France and currently teaching at the Collège de France, has extended the growth model into the terrain of policy and inequality. His recent work explores how innovation interacts with competition, social mobility, and the environment.
He has argued that innovation should not be feared as a destroyer of jobs or industries, but managed as a force for inclusion and resilience. In his book The Power of Creative Destruction (with Céline Antonin and Simon Bunel), Aghion contends that societies must embrace technological change while protecting those displaced by it through education, retraining, and dynamic welfare systems.
Aghion’s policy message is both optimistic and pragmatic: “We should not try to slow down innovation; we should make it fairer.” His vision aligns growth theory with the moral imperative of shared prosperity — a theme that resonates deeply in an era of automation, inequality, and climate anxiety.
Peter Howitt: The Theorist of Endogenous Growth
Canadian economist Peter Howitt, Professor Emeritus at Brown University, has been Aghion’s long-time collaborator and one of the pioneers of endogenous growth theory.
His contributions go beyond formal modelling. Howitt explored how innovation spreads through economies, how institutions adapt to technological change, and how policy can nurture — or stifle — the innovative process.
In later research, he analysed how credit markets, education systems, and regulatory frameworks interact with innovation. Howitt’s models explained why some nations, even with similar resources, achieve vastly different growth trajectories — depending on how effectively they channel creativity into productivity.
Together, Aghion and Howitt built a framework that integrates micro-level innovation incentives with macroeconomic outcomes. Their theory now underpins much of modern economic policy, influencing debates on industrial strategy, intellectual property, and environmental transitions.
From Theory to Reality: Why It Matters Today
The Nobel Committee’s choice in 2025 reflects not just academic brilliance, but relevance. In an era defined by artificial intelligence, automation, and climate challenges, the trio’s work offers profound guidance.
Their research collectively tells us that growth is not about producing more of the same, but about constantly producing what’s new.
- Mokyr reminds us that culture and institutions create the conditions for innovation.
- Aghion shows how policy can harness innovation for social good.
- Howitt demonstrates that growth depends on nurturing creativity at every level of the economy.
Together, they provide a comprehensive answer to one of the world’s most urgent questions: How can societies innovate without leaving people behind?
Bridging History and the Future
One of the most striking aspects of this Nobel trio is how their work connects centuries of thought. Mokyr’s historical perspective bridges the Enlightenment to the digital age; Aghion and Howitt’s models translate those lessons into modern economic mathematics.
In essence, their contributions form a continuum — from the philosophical to the empirical, from the historical to the mathematical. Each stands on the shoulders of Schumpeter, yet extends his ideas into new domains.
Today, when policymakers debate how to regulate AI or transition to green technologies, they are unknowingly echoing the principles that Aghion, Howitt, and Mokyr spent decades articulating: that progress is a double-edged sword — destructive yet essential — and that wise governance must harness its power for collective benefit.
The Legacy of the 2025 Nobel Laureates
As the three economists join the ranks of Nobel luminaries, their combined legacy transcends academia. They remind us that innovation is not just a technical phenomenon but a human one — born from curiosity, courage, and the willingness to challenge old certainties.
Their message is clear: economic growth is a story of renewal. Whether in the steam engine, the silicon chip, or the algorithm, humanity’s greatest asset has always been its ability to reinvent itself.
In honouring Joel Mokyr, Philippe Aghion, and Peter Howitt, the Nobel Committee has not merely celebrated economists; it has honoured the spirit of progress itself — the belief that, despite disruption and dislocation, the future remains ours to invent.
Nobel for the Future
As Mokyr, Aghion, and Howitt join the ranks of Nobel laureates, their message rings clear: Our greatest resource isn’t gold, oil, or data. It’s imagination.
They remind us that the future is not inherited; it’s invented — and that innovation, though often disruptive, remains humanity’s most hopeful act.
“Progress,” wrote Mokyr, “is a promise we make to the future.”
The 2025 Nobel Prize in Economics is more than a recognition of academic brilliance — it’s a celebration of that promise.
About the authors:
- Dr. Nitish Kumar Arya: Assistant Professor (Economics), University Department of Economics, Bhupendra Narayan Mandal University, Madhepura, Bihar
- Mrs. Tulika Singh: Research Scholar, University Department of Economics, Bhupendra Narayan Mandal University, Madhepura, Bihar
