The Nobel Prize for Economic Sciences 2025 goes to Joel Mokyr, Philippe Aghion and Peter Howitt “for having explained innovation-driven economic growth”¹.

Joel Mokyr (1/2 of the prize), an economic historian, Northwestern University, USA, has identified “the prerequisites for sustained growth through technological progress”. Economic growth is very vulnerable and “progress is neither automatic, nor guaranteed”. Technological progress serves ultimately the management of two unprecedented challenges that humanity has ever faced. “The only way we can cope with the climate and demographic crises is to invent us out of them²”, says Mokyr. Over the last two decades, we have had an uninterrupted sustained growth, which has tremendously boosted living standards. Joel Mokyr is emphasizing that societies have to develop so called “propositional knowledge”, i.e. understanding how innovations do work in their DNA to avoid further trials-and-error. With this deeper knowledge, the innovation itself becomes more inclusive and sustainable. He highlights the importance of “being open to new ideas and allowing for change”.

Philippe Aghion, College de France and INSEAD, FR, London School of Economics and Political Science, UK and Peter Howitt, Brown University, USA (each hold ¼ of the prize) are acknowledged for “the theory of sustained growth through creative destruction”. In their flagship article from 1992, they constructed a mathematical model for it: when new and better products enter the market, companies selling the standard ones will lose out. The innovation stands for something creative and destructive at the same time. Established entities, running the risk to become outcompeted, will block innovation. One of the major risks here is stagnation. Aghion and Howitt`s mathematical model offers a concrete framework for companies` incentives to invest in R&D, patent protection in longer term etc. Success is potentially translated into market leadership and profitability, which rises the appetite of others to invest as well. The cycle of innovating, displacement and renewal stands at the core of the sustained growth and continuous progress.

The Austrian economist Joseph Schumpeter introduced already in the 1940s the idea that economic progress goes hand in hand with the element of disruption, firstly mentioning the term “creative destruction”. Newer versions or products replaced most of the industrial innovations – from steam engines to the initial version of internet³. The demand cycle for specific job profiles has become shorter and division of labor follows the macro trends. The constant reshaping of the required job roles is very painful, but inevitable – economy is converting, and once well-recognized skills are becoming very fast obsolete. From macroeconomic perspective, national, supranational resource allocation and optimal political decisions need to remain in sync with this dynamics. Political profiles need major adaptation.

Since the publication of Business Cycles, 1939, from Schumpeter, a lot has happened. The logic remains very solid – only the overlapping Kondratjew cycles are now shorter due to the nature of exponentiality. In Schumpeter`s view capitalism is not long-term viable. “Can capitalism survive? No. I do not think it can” stems from his 1942 book Capitalism, Socialism, and Democracy. “Innovation” and “entrepreneurship” are the driving forces behind “capitalism”. In case they would be restricted, this would mean destruction of the capitalism itself through abolishment of private property and freedom, which paves the way to a natural transition into socialism. What if we are now witnessing the realization of Schumpeter’s prediction: the collapse of capitalism? Partially here lies the monumental importance of the Economic Nobel Prize 2025 putting the “innovation-driven sustained growth” and “creative destruction” again in the spotlight.