Joel Mokyr, Philippe Aghion, and Peter Howitt have been awarded the 2025 Nobel Memorial Prize in economic Sciences for groundbreaking research illuminating how innovation fuels long-term economic growth. The Royal Swedish Academy of sciences recognized their work, conducted over decades, for fundamentally reshaping our understanding of sustained prosperity and technological progress.
This year’s prize arrives at a pivotal moment as nations grapple with slowing productivity growth and the transformative potential – and disruption – of artificial intelligence. The laureates’ models provide a framework for analyzing the complex interplay between innovation, market structures, and policy interventions needed to foster sustained economic expansion.Their insights are crucial for policymakers seeking to navigate the challenges and opportunities presented by rapid technological change.
Mokyr, Aghion, and Howitt independently, and then in collaboration, built upon earlier economic theories to explain why innovation isn’t a one-time event, but a continuous process.Prior to their work, economists struggled to reconcile sustained growth with diminishing returns to capital. The laureates demonstrated that innovation overcomes these limitations by creating new possibilities and driving productivity gains.
Aghion and Howitt, in their 1998 book Endogenous Growth Theory, developed a model demonstrating how innovation arises from a “creative destruction” process. New technologies and products inevitably displace older ones, leading to a dynamic cycle of growth. This process, while disruptive in the short term, is essential for long-run economic advancement.
mokyr’s research, particularly his 2018 book A Culture of Growth, broadened the scope of innovation beyond purely economic factors. He emphasized the crucial role of ideas, beliefs, and cultural factors in shaping the direction and pace of technological progress. mokyr argued that a society’s “intellectual habitat” – its openness to new ideas and its capacity for knowledge dissemination – is a key determinant of its economic success.
“Innovation is not simply a matter of technological breakthroughs,” Mokyr has stated,”it’s about how societies organize themselves to generate,disseminate,and utilize new knowledge.”
The Nobel committee highlighted how the laureates’ work has influenced policy debates surrounding intellectual property rights, research and development funding, and education. Their research underscores the importance of creating an environment that encourages risk-taking, experimentation, and the free flow of ideas. The prize amount of 11 million Swedish krona (approximately $1 million USD) will be shared equally among the three laureates.
