Context:

The Royal Swedish Academy of Sciences awarded the 2025 Nobel Prize in Economic Sciences to Joel Mokyr, Philippe Aghion, and Peter Howitt for their pioneering contributions to our understanding of innovation‑driven economic growth and how sustained growth becomes possible in the modern economy.

Core Contributions of the Laureates

Joel Mokyr:

Mokyr, a professor at Northwestern University, was awarded half of the prize for identifying the prerequisites for sustained growth through technological progress. His research in economic history showed that a continual flow of "useful knowledge" is necessary for sustained growth, which includes propositional knowledge (understanding why something works) and prescriptive knowledge (practical instructions).

Philippe Aghion and Peter Howitt:

Aghion and Howitt shared the other half of the prize for developing the theory of sustained growth through creative destruction. Their mathematical model reveals the mechanisms of sustained growth, showing how newer, superior products continuously enter markets and displace companies selling older versions.

Significance:

Together, the three economists explained how the world moved from a time of slow or no growth to a time where growth became the “new normal.”

This happened because:

·         Societies built the right institutions (like laws, schools, and research centers),

·         They supported innovation and science,

·         And they allowed businesses to compete and grow.

Policy Implications & Challenges:

1.       R&D and Innovation Policy
Governments should support basic science and applied research, while creating incentives for private-sector innovation (grants, tax credits). However, overprotection or subsidies without competition can backfire.

2.      Competition, Decentralization & Market Entry
Policies must ensure open markets, prevent entrenched incumbents from blocking entry, and lower barriers for startups and creative firms.

3.      Institutional Reform
Growth depends on institutions that foster rule of law, property rights, openness to talent flows, education, and a culture of experimentation.

4.     Balancing Disruption & Social Equity
Creative destruction inevitably displaces workers and firms. Social safety nets, retraining policies, and transitional support are essential.

5.     Global Integration & Openness
The laureates warn against protectionism and deglobalization. Fragmented markets reduce scale and slow innovation diffusion.

Conclusion:

The 2025 Nobel laureates reframe our understanding of modern economic growth: we live in an era where innovation, institutions, and competition coalesce to make growth the norm rather than the exception. But their work also cautions us: growth is fragile and must be actively maintained. For policymakers, the message is clear—invest in science, nurture open markets, reform institutions, manage disruption, and resist complacency.