The 2025 Nobel Prize in Economic Sciences has been awarded Joel Mokyr, Philippe Aghion, and Peter Howitt.
They were awarded “for having explained innovation-driven economic growth.”
Their work "shows that economic growth cannot be taken for granted. We must uphold the mechanisms that underly creative destruction, so that we do not fall back into stagnation.”
The 2025 Nobel Prize in Economic Sciences has been awarded Joel Mokyr, Philippe Aghion, and Peter Howitt “for having explained innovation-driven economic growth.” The announcement was made by the Royal Swedish Academy of Sciences on Monday, 13 October 2025.
The Nobel Committee awarded half the prize to Joel Mokyr “for having identified the prerequisites for sustained growth through technological progress”, and the other half jointly to Philippe Aghion and Peter Howitt “for the theory of sustained growth through creative destruction.”
According to John Hassler, Chair of the Committee for Economic Sciences, “The laureates’ work shows that economic growth cannot be taken for granted. We must uphold the mechanisms that underly creative destruction, so that we do not fall back into stagnation.”
Throughout most of human history, economic growth has seen short and sparse spikes interspersed with long periods of stagnation. Comparing this to the current trend, we see that rapid technological advancements over the last two centuries have produced sustained economic growth, “with new products and production methods replacing old ones in a never-ending cycle.”
This has resulted in “a better standard of living, health and quality of life for people around the globe,” as opposed to earlier one-off improvements in living conditions and incomes.
Trying to understand why sustained economic growth has become the new normal, Joel Mokyr turned to historical sources to identify causes underlying sustained growth. He described “the mechanisms that enable scientific breakthroughs and practical applications to enhance each other and create a self-generating process.” He said that for such a process to function, it is important to know why a particular innovation works.
Prior to the industrial revolution, while it was obvious when an innovation worked, the reasoning behind it was not clear – this prevented further progress, leading to stagnation. He adds that a society that is open to change and new ideas is necessary for such inquiry to take place in the first place.
The ‘self-generating process’ that Mokyr described is when new technologies and processes replace old ones. This happens through a process called ‘creative destruction’ – when newer and improved products replace older and obsolete ones, reducing their commercial value. The process is ‘creative’ because it depends on innovation, and ‘destructive’ because older products get outcompeted.
In a 1992 article studying the mechanisms behind sustained growth, Philippe Aghion and Peter Howitt constructed a macroeconomic model for the ‘creative destruction’ process. The mathematical model showed how companies investing in improved processes and research outcompete companies that previously had the ‘best’ products but did not spend on development.
As such, their model sought to find an optimal volume of research and development for sustained economic growth.
The trio has not only proved that new technology drives sustained economic growth but has gone further to show how this works.
According to the Nobel Prize website, “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.”
A more detailed explanation states: “Their work shows that we must be aware of, and counteract, threats to continued growth. These threats may come from a few companies being allowed to dominate the market, restrictions on academic freedom, expanding knowledge at regional rather than global levels, and blockades from potentially disadvantaged groups. If we fail to respond to these threats, the machine that has given us sustained growth, creative destruction, may cease working – and we would once again need to become accustomed to stagnation.”
Joel Mokyr is a professor at Northwestern University, Illinois. Philippe Aghion is a professor at Collège de France and INSEAD, Paris, and at The London School of Economics and Political Science. Peter Howitt is a professor at Brown University, Rhode Island.
The Nobel Prize in Economic Sciences is formally referred to as the Sveriges Riksbank Prize, after the central bank of Sweden. Unlike the other prizes, the prize was first introduced in 1968 by the Swedish central bank on its 300th anniversary, in memory of Alfred Nobel.
The award will be conferred to the trio later this year in December, along with three gold medals, and a million-dollar prize. Half the prize will be awarded to Mokyr, with Aghion and Howitt splitting the other half.
This is the final prize announcement, bringing an end to ‘Nobel Week’. Prizes in Medicine, Physics, Chemistry, Literature, and Peace were announced previously between 6 and 10 October 2025. The formal Nobel ceremony is scheduled to take place in Stockholm on 10 December 2025, the anniversary of Alfred Nobel’s death. [Rh/DS]