Nobel Prize in Economics-2025: Awarded for Innovation and ‘Creative Destruction’ in Economic Growth

Why it is in the news:

• The 2025 Nobel Prize in Economics was awarded to three distinguished economists from the USA, UK, and France—Joel Mokyr, Philippe Aghion, and Peter Howitt.
• Their research focuses on innovation-driven economic growth and the process of creative destruction, which explains how new technologies and innovations replace old systems, thereby promoting sustained economic development.
• The award is significant not only for the academic world but also for business, industry, and policymakers, as it emphasizes that economic growth depends not only on resources or investment but also on innovation, technological progress, and competition.

Key winners and their contributions:

1. Joel Mokyr
   • Institution: Northwestern University, USA
   • Main contribution: Through historical analysis, Mokyr demonstrated that sustained economic growth requires both technological progress and social factors.
     • According to him, economic growth is driven not merely by capital or investment but primarily by innovation and technological advancement.
   • Prize share: Half of the Nobel Prize was awarded to Mokyr.
2. Philippe Aghion and Peter Howitt
   • Institutions: College de France, INSEAD, LSE (Aghion); Brown University, USA (Howitt)
   • Main contribution: Developed the ‘Creative Destruction’ model in 1992.
     • This theory states that new and better technologies replace old systems and products, increasing market competition and enabling sustained economic growth.
     • They mathematically demonstrated how innovation sustains continuous economic growth.
   • Prize share: The remaining half was shared between Aghion and Howitt.

Significance of the Nobel Laureates’ achievements:

1. Clear link between economic growth and innovation:
   • The research showed that sustained economic growth of nations depends not just on investment or capital but fundamentally on innovation and technological progress.
2. Impact of technological progress and market competition:
   • New products and systems replace older, inefficient methods.
   • This process improves living standards, health, and prosperity.
3. Guidance for policy-making and practical applications:
   • The research helps policymakers design future economic strategies.
   • It also provides academic and practical directions for businesses and industries.
4. Sustainable and long-term economic benefits:
   • New technologies challenge old systems, ensuring long-term stable and sustainable growth.
   • Consequently, this contributes to poverty reduction and global prosperity.