 "Why 'creative destruction' lies at the heart of this year's Economics Nobel Prize")
The Royal Swedish Academy of Sciences gave the 2025 Nobel Prize in Economic Sciences to three researchers—Joel Mokyr, Philippe Aghion, and Peter Howitt—for their crucial work on how innovation leads to long-lasting economic growth.
The experts won for “having explained innovation-driven economic growth,” which is the key to why the world has become richer and lifted huge numbers of people out of poverty over the last two centuries. The three winners showed that constant progress in technology improves living standards, health, and quality of life for everyone.
What did Joel Mokyr’s research show?
Joel Mokyr of Northwestern University received half of the prize money. His research looked at history, explaining what was needed for growth to last through new technology.
Mokyr found that new inventions can keep coming one after the other in a “self-generating process.”
But for this to happen, society doesn’t just need to know if an invention works; it also needs to know the scientific reasons why.
He pointed out that before the Industrial Revolution, people often lacked this scientific focus, making it hard to build on new ideas. He also stressed that a society must be open to new ideas and ready for change.
What is ‘Creative Destruction?’
The other half of the prize was jointly awarded to Philippe Aghion and Peter Howitt. Their main idea is called “creative destruction.”
This theory says that when a new or better product hits the market, the older products (and the companies that make them) lose out.
The innovation is “creative” because it brings something new, but it is “destructive” because it kills off the old way of doing things. Aghion and Howitt created a mathematical model showing that this constant cycle of new things replacing old things is the main way economies keep growing over time.
Impact Shorts
More ShortsThe award was given as nations across the globe strive to recover from years of weak economic growth since the 2008 financial crisis, facing challenges such as slowing productivity improvements, slow advancements in living standards, and increasing political unrest.
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