The Nobel Prize in Economics 2025 was awarded on Monday to Joel Mokyr, Philippe Aghion, and Peter Howitt “for explaining economic growth driven by innovation.” 

Half of the prize goes to Mokyr “for identifying the prerequisites for sustained growth through technological progress,” while the other half is shared by Aghion and Howitt “for their theory of sustained growth through creative destruction.” 

Economic historian Joel Mokyr used historical sources to uncover the roots of sustained growth—a defining feature of modern economies.

He demonstrated that for innovation to become self-sustaining, it is not enough to know that something works; understanding why it works is crucial. Before the Industrial Revolution, many inventions lacked solid scientific explanations, which limited their potential. Mokyr also emphasized the importance of societies being open to new ideas and willing to embrace change. 

Aghion and Howitt, meanwhile, developed a mathematical model in 1992 to explain “creative destruction,” a concept originally introduced by Joseph Schumpeter.

According to their model, when a new and improved product enters the market, firms producing older versions tend to lose ground or disappear. Innovation is thus both creative, in what it brings, and destructive, in what it replaces. 

In different ways, the three laureates showed how this dynamic generates tensions that must be managed constructively. If not, established players and vested interests may obstruct innovation to protect their position. 

“The laureates’ work shows that economic growth cannot be taken for granted. We must defend the mechanisms behind creative destruction to avoid stagnation,” said John Hassler, chair of the Committee for the Prize in Economic Sciences.