Introduction: Why sustained growth matters
Over the last two centuries, the world has seen unprecedented economic progress, driven by a continuous flow of technological innovation. This process—often described through the lens of creative destruction—replaces old technologies with better ones, enabling living standards to rise steadily. The Nobel Prize in Economic Sciences this year highlights three scholars who illuminate how innovation translates into sustained growth and what societies can do to nurture it.
The core idea: sustained growth through technological progress
Historically, growth was sporadic. In many eras, important discoveries did not translate into long-run improvements. The Industrial Revolution changed that trajectory by creating a self-reinforcing loop where new ideas lead to practical innovations, which in turn inspire further breakthroughs. The 2025 laureates—Joel Mokyr, Philippe Aghion, and Peter Howitt—offer complementary perspectives on why this new normal emerged and how it can persist.
Two lenses on growth
Mokyr emphasizes the accumulation of useful knowledge as the engine of growth. He distinguishes between propositional knowledge (knowing why something works) and prescriptive knowledge (knowing how to apply it). Before the Industrial Revolution, prescriptive know-how often outpaced propositional understanding, making it hard to build durable progress. The Scientific Revolution and Enlightenment helped align these streams, enabling environmental, industrial, and manufacturing advances to compound over time.
In contrast, Aghion and Howitt provide a formal framework: creative destruction as the engine of progress. Their model shows how competition drives firms to innovate, how patents create temporary monopolies that incentivize R&D, and how new technologies displace older ones. The dynamic balance between innovation and competition determines the speed of growth and the allocation of resources across the economy.
What changes in institutions and markets?
The laureates underscore that growth depends not only on ideas but also on institutions. An open society that allows new ideas to flourish, and that protects mobility, experimentation, and academic freedom, reduces resistance to change. In Mokyr’s view, a culture and polity willing to adapt—such as the Enlightenment-era shift toward more representative institutions—facilitates sustained growth. This openness helps transform brilliant ideas into widespread benefits.
Practical pathways to growth
Aghion and Howitt’s insights point to policies that balance incentives for innovation with social welfare. Their macroeconomic model demonstrates that while strong R&D activity boosts growth, it can also raise concerns about market concentration and job dislocation. The takeaway: governments may need to subsidize or otherwise support R&D to capture societal gains, while also investing in retraining and social safety nets to ease transitions for workers displaced by new technologies.
On the corporate side, the model explains why innovation thrives only when firms avoid stagnation at the top of the technology ladder. The prospect of outperformance by entrants motivates ongoing improvements, but not so much that market concentration stifles new ideas. A healthy churn of firms—supported by competitive policy and flexible labor markets—keeps the innovation machine humming.
Implications for today and tomorrow
The discussion matters beyond theory. Current topics—artificial intelligence, climate tech, medicine, and digital communication—are arenas where productive, well-governed creative destruction can yield substantial welfare gains. Mokyr’s warning is clear: without well-designed policies, well-intentioned innovation can generate negative side effects. Policymakers must anticipate trade-offs, investing in skills, infrastructure, and institutions that sustain growth while mitigating risks such as inequality, environmental strain, and disruptions in employment.
Conclusion: A roadmap for sustainable progress
From stagnation to sustained growth is not an inevitability; it is the result of coordinated advances in ideas, practice, and policy. The Nobel laureates illustrate that sustained growth hinges on a continual flow of useful knowledge, a competitive impulse that drives R&D, and a society open to new possibilities. If we harness these dynamics with thoughtful governance, we can preserve the momentum of innovation and improve living standards for generations to come.
