In a year when many economies are battling sluggish productivity, rising geopolitics and the disruptive rise of artificial intelligence, the Nobel Prize committee turned the spotlight on what lies at the heart of sustained economic growth. The 2025 laureates—Joel Mokyr (Northwestern University), Philippe Aghion (Collège de France/INSEAD/LSE) and Peter Howitt (Brown University), were awarded for having explained innovation-driven economic growth.
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Their collective work offers a sharp lens through which business leaders, policy-makers and entrepreneurs can view the challenge of growth in the 21st century: how to create the conditions for innovation, how to manage the destructive side of disruption, and how to translate technological progress into sustained economic value.
The Pillars of the 2025 Prize
| Winner (s) | Work |
| Joel Mokyr | The Preconditions of Technological Progress Mokyr was awarded half of the prize for identifying the prerequisites of sustained growth through technological progress. He delved into the economic-historical roots of innovation, investigating how “useful knowledge,” mechanical competence and institutions conducive to technological progress have built the engines of growth over centuries. For businesses today, Mokyr’s findings underscore that innovation is not automatic. It relies on a supportive ecosystem—education, open markets, strong institutions, and investment in “useful” knowledge. |
| Philippe Aghion & Peter Howitt | Creative Destruction as Growth Engine The other half of the prize was split between Aghion and Howitt for their work on growth via “creative destruction.” Their core idea: long-term growth demands not only incremental improvement but also the displacement of outdated technologies and firms by new ones. For businesses, this means embracing disruption rather than just resisting it. The winners point out that firms clinging to legacy technologies may inhibit growth, while those that foster radical innovation create the impetus for new value-creation. |
Connecting to Business Strategy and Growth
The prize announcement made explicit what many strategists already appreciate: that innovation-driven growth matters not only at the macroeconomic level but also at the firm-level. Companies that align their strategy with the kind of growth models the laureates developed—investing in R&D, fostering internal culture that welcomes change, embracing digital transformation—are more likely to venture ahead rather than be left behind.
Recommended Reading: Key Papers by the 2025 Nobel Laureates in Economics
| Author(s) | Citation | Contribution |
|---|---|---|
| Joel Mokyr | Mokyr, Joel. 2005. “Long-Term Economic Growth and the History of Technology.” In Handbook of Economic Growth, vol. 1, eds. Philippe Aghion & Steven Durlauf, Chapter 17, pp. 1113-1180. Amsterdam: Elsevier. | Surveys how modern economic growth arose in the West (especially post-Industrial Revolution) by connecting technological change, the growth of “useful knowledge”, and institutional/cultural shifts. |
| Joel Mokyr | Mokyr, Joel. 2005. “Useful Knowledge as an Evolving System: The View from Economic History.” In The Economy as an Evolving Complex System III: Current Perspectives and Future Directions, eds. Lawrence E. Blume & Steven N. Durlauf, pp. 309-338. Oxford: Oxford University Press. | Develops an evolutionary metaphor for how knowledge grows and accumulates over time. Emphasises that the production and diffusion of “useful knowledge” is central to sustained growth. |
| Philippe Aghion & Peter Howitt | Aghion, Philippe & Howitt, Peter. 1992. “A Model of Growth Through Creative Destruction.” Econometrica, Vol. 60, No. 2, pp. 323-351. EconPapers+2EconBiz+2 | Introduces a formal endogenous growth model in which innovations “destroy” older technologies and thereby drive economic growth — often referred to as the “creative destruction” framework. |
| Aghion, Philippe et al. | Aghion, Philippe; Bloom, Nick; Blundell, Richard; Griffith, Rachel; Howitt, Peter. 2005. “Competition and Innovation: An Inverted-U Relationship.” The Quarterly Journal of Economics, Vol. 120, No. 2, pp. 701-728. | Provides empirical and theoretical analysis of how market competition influences innovation — finding an inverted-U shape: moderate competition boosts innovation, too little or too much may hinder it. |
| Aghion, Philippe; Akçigit, Ufuk; Howitt, Peter | Aghion, Philippe; Akçigit, Ufuk; Howitt, Peter. 2013. “What Do We Learn From Schumpeterian Growth Theory?” NBER Working Paper 18824. | A survey of Schumpeterian / “creative destruction” growth theory: examines competition, firm dynamics, institutions, and technological waves — helps tie the theory to broader empirical/stylised-fact evidence. |
The collected works of Joel Mokyr, Philippe Aghion, and Peter Howitt together form a cohesive intellectual foundation for understanding how innovation sustains economic growth. Mokyr’s historical and cultural analyses explain why modern growth first emerged by emphasizing the accumulation of “useful knowledge,” institutional openness, and the social values that enable invention and diffusion. Aghion and Howitt’s formal and empirical models then demonstrate how this process operates dynamically, through continual cycles of creative destruction, where new technologies replace old ones and competitive pressures drive progress. Collectively, their research history shows that growth is not automatic or purely technological; it depends on a delicate balance of culture, institutions, competition, and policy.
