{"id":1661,"date":"2025-10-14T03:21:44","date_gmt":"2025-10-14T03:21:44","guid":{"rendered":"https:\/\/armotto.com\/?p=1661"},"modified":"2025-10-20T15:51:05","modified_gmt":"2025-10-20T15:51:05","slug":"the-2025-nobel-economics-prize-honours-economic-creation-and-destruction","status":"publish","type":"post","link":"https:\/\/armotto.com\/index.php\/2025\/10\/14\/the-2025-nobel-economics-prize-honours-economic-creation-and-destruction\/","title":{"rendered":"The 2025 Nobel economics prize honours economic creation and destruction"},"content":{"rendered":"
Economists Joel Mokyr, Philippe Aghion, and Peter Howitt.<\/span> Ill. Niklas Elmehed \u00a9 Nobel Prize Outreach <\/a><\/span><\/figcaption><\/figure>\n

Three economists working in the area of \u201cinnovation-driven economic growth\u201d have won this year\u2019s Nobel Memorial Prize in Economic Sciences<\/a>.<\/p>\n

Half of the 11 million Swedish kronor (about A$1.8 million) prize was awarded to Joel Mokyr<\/a>, a Dutch-born economic historian at Northwestern University.<\/p>\n

The other half was jointly awarded to Philippe Aghion<\/a>, a French economist at Coll\u00e8ge de France and INSEAD, and Peter Howitt<\/a>, a Canadian economist at Brown University. <\/p>\n

Collectively, the trio\u2019s work has examined the importance of innovation in driving sustainable economic growth. It has also highlighted that in dynamic economies, old firms die as new firms are being born. <\/p>\n

Innovation drives sustainable growth<\/h2>\n

As noted<\/a> by the Royal Swedish Academy of Sciences, economic growth has lifted billions of people out of poverty over the past two centuries. While we take this as normal, it is actually very unusual in the broad sweep of history.<\/p>\n

The period since around 1800 is the first in human history when there has been sustained economic growth. This warns us we should not be complacent. Poor policy could see economies stagnate again. <\/p>\n

One of the Nobel judges gave the example<\/a> that in Sweden and the United Kingdom there was little improvement in living standards in the four centuries between 1300 and 1700.<\/p>\n

Mokyr\u2019s work showed that prior to the Industrial Revolution, innovations were more a matter of trial and error than being based on scientific understanding. He has argued<\/a> that sustained economic growth would not emerge in: <\/p>\n

\n

a world of engineering without mechanics, iron-making without metallurgy, farming without soil science, mining without geology, water-power without hydraulics, dyemaking without organic chemistry, and medical practice without microbiology and immunology.<\/p>\n<\/blockquote>\n

Mokyr gives the example<\/a> of sterilising surgical instruments. This had been advocated in the 1840s or earlier. But surgeons were offended by the suggestion they might be transmitting diseases. It was only after the work of Louis Pasteur and Joseph Lister in the 1860s that the role of germs was understood and sterilisation became common. <\/p>\n

Mokyr emphasised the importance of society being open to new ideas. As the Nobel committee put it<\/a>: <\/p>\n

\n

practitioners, ready to engage with science, along with a societal climate embracing change, were, according to Mokyr, key reasons why the Industrial Revolution started in Britain.<\/p>\n<\/blockquote>\n

Winners and losers<\/h2>\n

This year\u2019s other two laureates, Aghion and Howitt, recognised that innovations create both winning and losing firms. In the US, about 10%<\/a> of firms enter and 10% leave the market each year. Promoting economic growth requires an understanding of both processes.<\/p>\n

Their 1992 article<\/a> built on earlier work on the concept of \u201cendogenous growth<\/a>\u201d \u2013 the idea<\/a> that economic growth is
\ngenerated by factors inside an economic system, not the result of forces that impinge from outside. This earned a Nobel prize for Paul Romer<\/a> in 2018.<\/p>\n

It also drew on earlier work on \u201ccreative destruction<\/a>\u201d by Joseph Schumpeter<\/a>.<\/p>\n

The model created by Aghion and Howitt implies governments need to be careful how they design subsidies to encourage innovation.<\/p>\n

If companies think that any innovation they invest in is just going to be overtaken (meaning they would lose their advantage), they won\u2019t invest as much in innovation. <\/p>\n

Their work also supports the idea governments have a role in supporting and retraining those workers who lose their jobs in firms that are displaced by more innovative competitors.<\/p>\n

This will build political support for policies that encourage economic growth, as well.<\/p>\n

\u2018Dark clouds\u2019 on the horizon?<\/h2>\n

The three laureates all favour economic growth, in contrast to growing concerns<\/a> about the impact of endless growth on the planet. <\/p>\n

In an interview<\/a> after the announcement, however, Aghion called for carbon pricing to make economic growth consistent with reducing greenhouse gas emissions. <\/p>\n

He also warned about the gathering \u201cdark clouds\u201d of tariffs; that creating barriers to trade could reduce economic growth. <\/p>\n

And he said we need to ensure today\u2019s innovators do not stifle future innovators through anti-competitive practices. <\/p>\n

The newest Nobel prize<\/h2>\n

The economics prize was not one of the five originally nominated<\/a> in Swedish chemist Alfred Nobel\u2019s will in 1895. It is formally called the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. It was first awarded in 1969.<\/p>\n

The awards to Mokyr and Howitt continue the pattern of the economics prize being dominated by researchers working at US universities. <\/p>\n

It also continues the pattern of over-representation of men. Only three of the 99 economics<\/a> laureates have been women. <\/p>\n

Arguably, economics professor Rachel Griffith, rather than Mokyr, could have shared the prize with Aghion and Howitt this year. She co-authored the book Competition and Growth<\/a> with Aghion, and co-wrote an article<\/a> on competition with both of them.<\/p>\n

\"The<\/p>\n

John Hawkins does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.<\/span><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Economists Joel Mokyr, Philippe Aghion, and Peter Howitt. Ill. Niklas Elmehed \u00a9 Nobel Prize Outreach Three economists working in the area of \u201cinnovation-driven economic growth\u201d have won this year\u2019s Nobel Memorial Prize in Economic Sciences. Half of the 11 million Swedish kronor (about A$1.8 million) prize was awarded to Joel Mokyr, a Dutch-born economic historian…<\/p>\n","protected":false},"author":1,"featured_media":1663,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[],"class_list":["post-1661","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-europe"],"_links":{"self":[{"href":"https:\/\/armotto.com\/index.php\/wp-json\/wp\/v2\/posts\/1661","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/armotto.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/armotto.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/armotto.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/armotto.com\/index.php\/wp-json\/wp\/v2\/comments?post=1661"}],"version-history":[{"count":2,"href":"https:\/\/armotto.com\/index.php\/wp-json\/wp\/v2\/posts\/1661\/revisions"}],"predecessor-version":[{"id":1664,"href":"https:\/\/armotto.com\/index.php\/wp-json\/wp\/v2\/posts\/1661\/revisions\/1664"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/armotto.com\/index.php\/wp-json\/wp\/v2\/media\/1663"}],"wp:attachment":[{"href":"https:\/\/armotto.com\/index.php\/wp-json\/wp\/v2\/media?parent=1661"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/armotto.com\/index.php\/wp-json\/wp\/v2\/categories?post=1661"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/armotto.com\/index.php\/wp-json\/wp\/v2\/tags?post=1661"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}