When the Royal Swedish Academy of Sciences awarded the 2025 Nobel Prize in Economic Sciences to Joel Mokyr, Philippe Aghion, and Peter Howitt, it was not simply a gesture toward academic brilliance. It was a recognition of one of the deepest questions in our age: What makes growth sustainable rather than a fleeting burst? Their work, centered on innovation and the mechanism of creative destruction, provides a powerful lens through which to view the world’s economic trajectory one that resonates far beyond ivory tower debates.
For most of human history, economic life was characterized by stagnation. Productivity advances were sporadic and largely disconnected. The world watched as societies rose and fell, but long stretches produced little structural change. Then the Industrial Revolution awakened a new dynamic a virtuous spiral of invention after invention, each building on previous breakthroughs. How this shift became more than a historical anomaly is the story that Mokyr, Aghion, and Howitt tell.
Joel Mokyr tackles the historical foundation. He examines how societies cultivate the mindset and institutions that enable innovation to reproduce itself. It is not enough for a single invention to exist; it must also be understood, improved, and spread. Mokyr explores how scientific knowledge, intellectual culture, and communication networks laid the groundwork for technological progress to become cumulative rather than erratic.
Meanwhile, Philippe Aghion and Peter Howitt developed a formal model explaining how innovation can be endogenous that is, generated from within the economy itself. Their concept of creative destruction captures both the promise and peril of progress. A new invention may render older technologies obsolete, displacing firms and disrupting industries. But precisely through that disruption, resources move toward more promising ventures, competition intensifies, and growth accelerates.
That cycle is delicate. If institutions prevent firms from failing or shield old incumbents from competition, the incentives to innovate weaken. Likewise, if barriers block new entrants or if the market is artificially compressed, growth stalls. Their framework helps explain why some economies stagnate even when they have access to technology: the system that organizes innovation matters as much as the innovations themselves.
In today’s climate, this work feels urgent. As nations debate industrial policy, AI regulation, climate tech, and supply chain sovereignty, the balance between protecting existing industries and nurturing future ones is under constant strain. Aghion has warned of “dark clouds” forming when protectionism, deglobalization, or policies that stifle competition creep in. When governments strangle the dynamism that fuels innovation, they risk eroding the very engine of prosperity.
What sets this Nobel moment apart is its message: Growth is not automatic; it is fragile and must be defended. It is not enough to seed innovation. We must maintain the environment that allows experimentation, the failure that purges, and the entry that energizes. Otherwise, the very creative destruction that drives progress turns into stagnation.
On a human level this means rethinking how we invest in education, how we design competition policy, and how we incentivize risk-taking in businesses and research. It means renewing belief in scientific discovery, encouraging open exchange of ideas, and preserving market structures that reward novelty rather than entrenched advantage.
To be sure, the story is not without tension. Disruptive change generates winners and losers. Workers in declining industries often feel the cost before the gains become visible. Firms built on old models fight for survival. But the history that Mokyr maps, and the model Aghion and Howitt formalize, teach us that societies that embrace the churn are likelier to arrive at higher living standards over time.
As we enter what many call a new age of technological upheaval—AI, biotechnology, green energy the need for policies attuned to innovation’s rhythms has never been greater. Mokyr, Aghion, and Howitt did more than chart academic frontiers. They handed us a guide for steering economies toward prosperity without forgetting the risks inherent in disrupting the old to welcome the new. May their insight become more than a prize. May it become a blueprint.
