3 share Nobel in Economics for innovation-driven, sustained economic growth

Stockholm: The final Nobel, for Economics, of this year’s prize season went to Joel Mokyr (Northwestern University, the US), Philippe Aghion (College de France and INSEAD, Paris, France) and Peter Howitt (Brown University, the US) on Monday for having explained innovation-driven, sustained economic growth.

While with one half of the coveted prize went to Mokyr “for having identified the prerequisites for sustained growth through technological progress”, the other half was awarded jointly to Aghion and Howitt “for the theory of sustained growth through creative destruction”, said the Royal Swedish Academy of Sciences, while presenting the “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2025”.

“Over the last two centuries, for the first time in history, the world has seen sustained economic growth. This has lifted vast numbers of people out of poverty and laid the foundation of our prosperity. This year’s laureates in the Economic Sciences, Joel Mokyr, Philippe Aghion and Peter Howitt, explain how innovation provides the impetus for further progress,” said the Academy.

Mokyr used historical sources as one means to uncover the causes of sustained growth becoming the new normal.

He demonstrated that if innovations are to succeed one another in a self-generating process, we not only need to know that something works, but we also need to have scientific explanations for why.

“The latter was often lacking prior to the industrial revolution, which made it difficult to build upon new discoveries and inventions. He also emphasised the importance of society being open to new ideas and allowing change,” according to a statement by the Academy.

Meanwhile, Aghion and Howitt also studied the mechanisms behind sustained growth.

In an article from 1992, they constructed a mathematical model for what is called creative destruction: when a new and better product enters the market, the companies selling the older products lose out. The innovation represents something new and is thus creative. However, it is also destructive, as the company whose technology becomes passe is outcompeted.

In different ways, the laureates show how creative destruction creates conflicts that must be managed in a constructive manner. Otherwise, innovation will be blocked by established companies and interest groups that risk being put at a disadvantage.

“The laureates’ work shows that economic growth cannot be taken for granted. We must uphold the mechanisms that underlie creative destruction, so that we do not fall back into stagnation,” said John Hassler, Chair of the Committee for the Prize in Economic Sciences.

Last year, the Royal Swedish Academy of Sciences awarded the Nobel Prize in Economic Sciences to three US economists for providing new insights into why there are such vast differences in prosperity between nations, trying to help solve the puzzle of why some countries are rich and others are poor.

Daron Acemoglu and Simon Johnson from the Massachusetts Institute of Technology (MIT) and James A. Robinson from the University of Chicago in the US were awarded the coveted honour for studies of how institutions are formed and affect prosperity.

IANS