The Royal Swedish Academy of Sciences has awarded the 2025 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel to Joel Mokyr, Philippe Aghion, and Peter Howitt for their research explaining how innovation drives economic growth.
Joel Mokyr of Northwestern University will receive one half of the prize “for having identified the prerequisites for sustained growth through technological progress.” The other half will be jointly awarded to Philippe Aghion of Collège de France, INSEAD, and the London School of Economics, and Peter Howitt of Brown University, “for the theory of sustained growth through creative destruction.”
Their collective work addresses a fundamental question in economics: why the world has experienced unprecedented and sustained economic growth over the last two centuries. For most of human history, stagnation was the norm. While occasional discoveries improved living conditions, growth would inevitably level off. The laureates’ research explains the mechanisms that broke this pattern, leading to the prosperity that has lifted millions from poverty.
Mokyr’s historical analysis demonstrated that for innovation to become a self-generating process, it requires not only knowing that a technology works but also understanding the scientific principles behind it. This deeper knowledge, largely absent before the Industrial Revolution, is crucial for building upon new inventions. He also stressed the importance of a society that is open to new ideas and tolerant of the changes they bring.
Aghion and Howitt developed a mathematical framework for the concept of “creative destruction.” In their influential 1992 paper, they modeled how new, superior products and methods enter the market, making older technologies obsolete. This process is “creative” as it drives progress and “destructive” because it displaces established companies and industries.
Together, the laureates show that innovation is an inherently disruptive force that creates conflict. Established firms and interest groups that stand to lose from new technologies may try to block them. Therefore, for sustained growth to continue, societies must manage these conflicts constructively.
“The laureates’ work shows that economic growth cannot be taken for granted,” said John Hassler, Chair of the prize committee. “We must uphold the mechanisms that underly creative destruction, so that we do not fall back into stagnation.”
The prize amounts to 11 million Swedish kronor, to be divided with one half for Mokyr and the other half shared between Aghion and Howitt.
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