The 2025 Nobel Prize in Economics to Joel Mokyr, Philippe Aghion and Peter Howitt

Joel Mokyr, Philippe Aghion and Peter Howitt won the 2025 Nobel Prize in Economics “for explaining innovation-driven economic growth”.

Half of the prize goes to Joel Mokyr (economist at Northwestern University, USA) “for having identified the prerequisites for sustained growth through technological progress”; the other half is split between Aghion and Howitt, respectively affiliated with the Collège de France and INSEAD (France) and the London School of Economics and Political Science, UK, and Brown University (USA), “for the theory of sustained growth through creative destruction”.

Over the last two centuries, for the first time, the world has experienced sustained and extraordinarily stable economic growth, which has translated into an improvement in the standard of living, quality of life and health of many people. It hasn’t always been this way. For much of human history, economic stagnation was the norm, living standards did not improve from one generation to the next and technological innovations, although present, remained sporadic, like isolated flashes.

Mokyr, Aghion and Howitt understood that the engine of sustained economic growth is technological innovation, which continues to provide impetus for further progress.

Joel Mokyr, an economic historian, has studied historical sources to understand the mechanisms that allow scientific discoveries and technological innovations to mutually enhance each other, in a self-healing process. He understood that for new inventions and discoveries to follow one another at a rapid pace and continue to improve, it is necessary not only to know that a technology is useful, but also to understand Why it is.

This second knowledge was absent before the Industrial Revolution, when we relied mainly on prescriptive knowledge: “recipes”, practical instructions that described what was needed to make something work. This meant that attempts to innovate were often haphazard, with no basis to rest on.

Things changed thanks to three factors. The first was the acquisition of a scientific mentality and method in industrial innovation in the Enlightenment phase: precise measurement methods, controlled experiments and the insistence on reproducibility of results led to consistent improvements, such as that of the steam engine thanks to contemporary insights into atmospheric pressure and vacuum, and advances in steelmaking thanks to the understanding of how oxygen reduced carbon content in molten cast iron. It was about knowledge propositionalwhich explained the reason for a given advancement.

The second was the presence, in Industrial Revolution England, of large numbers of workers with technical skills, such as craftsmen and engineers, capable of understanding designs and transforming ideas into practical applications.

The third factor is society’s openness to change, because new technologies, replacing old ones, can destroy the status quo and meet resistance from consolidated interest groups.

Philippe Aghion and Peter Howitt have instead built, based on modern data, a mathematical economic model that shows how technological progress leads to sustained growth. They understood that it is based on creative destruction, because when an innovative product comes onto the market, companies and jobs that produced the previous products disappear and are replaced. Innovation creates, because it brings something new, and at the same time destroys (old technologies that have become obsolete).

In different ways, the winners of the 2025 Nobel Prize in Economics have demonstrated how creative destruction creates conflicts that must be managed constructively, and that the sustained economic growth we have experienced from the mid-19th century to today has not always existed. Indeed, it may be threatened by factors such as the monopoly of a few companies, restrictions on academic freedom, local rather than global interests.