From stagnation to ongoing growth: what really drives progress
Over the last two centuries, the world has witnessed unprecedented economic growth. This ascent rests on a steady stream of technological innovation and the ability for new ideas to replace older methods—a process economists describe as creative destruction. The 2025 Nobel Prize in Economic Sciences was awarded to three scholars who illuminate why sustained growth became the global norm and what it will take to preserve it in the future.
The trio of insights: Mokyr, Aghion and Howitt
Economic historian Joel Mokyr, and economists Philippe Aghion and Peter Howitt, approach the question of growth with complementary tools. Mokyr emphasizes the flow of useful knowledge as the engine of progress. Aghion and Howitt model the formal mechanics of how ideas translate into investments in better production and products, illustrating how creative destruction reshapes industries.
Useful knowledge: the twin pillars
Mokyr distinguishes two kinds of knowledge that fuel growth. Propositional knowledge describes regularities in the natural world—why things work—which scientists and engineers can test and verify. Prescriptive knowledge, by contrast, offers practical instructions, diagrams, or recipes that show how to build or implement those ideas.
Before the Industrial Revolution, many innovations lacked a clear understanding of why they worked, limiting their ability to be improved upon. As the Scientific Revolution unfolded, measurement, controlled experiments, and the demand for reproducibility helped merge propositional and prescriptive knowledge. This synergy accelerated the refinement of technologies—from steam engines to steel production—making ideas more actionable and scalable.
The role of society and institutions
Mokyr argues that sustained growth requires a society receptive to change. Innovations can disrupt established privileges, creating resistance from entrenched interests. The Enlightenment helped open institutions to debate and compromise, reducing the barriers to reform. A climate that welcomes new ideas and allows change is as vital as the knowledge itself.
Creative destruction: a healthy engine for progress
Aghion and Howitt offer a dynamic picture: firms compete by innovating, but only the most effective improvements can maintain leadership. Patents provide temporary monopolies that reward breakthroughs, encouraging further R&D. Yet this system also breeds “business stealing,” where new leaders displace old ones, potentially reducing private incentives if the social gains are not fully captured.
Their macroeconomic model, grounded in general equilibrium, links production, investment in R&D, financial markets, and household savings. It helps explain why there can be an optimal pace for innovation—too little investment slows growth, while too rapid a sprint can destabilize employment and welfare. The take-away: policy should balance encouraging innovation with safeguards for workers and society at large.
Policy implications for a future of continued growth
The laureates’ work suggests several practical lessons. First, supporting R&D and ensuring competitive markets can be complementary, not contradictory, to sustained growth. Second, social mobility and flexible labor markets help workers adapt as industries transform. Third, investing in education and infrastructural systems that improve access to knowledge can magnify the positive effects of invention. Finally, keeping a vigilant eye on issues like inequality, climate change, and resource use is essential, because growth without sustainability can backfire.
Looking ahead: AI and the next wave of knowledge
As Mokyr notes, advances in artificial intelligence could intensify the feedback loop between propositional and prescriptive knowledge, accelerating the pace of innovation. However, AI also raises questions about who benefits from growth and how to distribute its gains. The Nobel-winning framework reminds us that sustained growth is not automatic; it requires institutions, policies, and cultures that foster open inquiry, fair competition, and resilient support systems for workers.
Bottom line
The 2025 laureates show that sustained growth stems from a continuous, collaborative process: ideas breakthrough through scientific understanding, are translated into practical applications, and are then refined by competitive markets. When society embraces change and designs smart policies, the machinery of creative destruction can keep delivering higher living standards for generations to come.
