Three economists won the 2025 Nobel Memorial Prize in Economic Sciences for their fundamental research explaining how innovation drives the sustained economic growth that has transformed the world over the past two centuries. The Royal Swedish Academy of Sciences awarded the prize on Monday to Joel Mokyr of Northwestern University, Philippe Aghion of the Collège de France and INSEAD, and Peter Howitt of Brown University. Their work combines economic history and mathematical theory to show why, after millennia of stagnation, modern economies began to grow and how that process is sustained by a turbulent but productive cycle of innovation.
The prize, officially named the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, was divided, with one half awarded to Mokyr for his historical analysis of the conditions that allow technological progress to flourish. The other half was awarded jointly to Aghion and Howitt for developing the theory of “creative destruction,” which provides a model for understanding how new technologies continually replace old ones, fueling persistent growth. The academy stated that because of their contributions, “we have a better chance to make sure growth can continue and be guided in the direction that benefits humankind.” The prize includes a monetary award of 11 million Swedish kronor, equivalent to just over $1 million.
A Historical Break from Stagnation
For most of human history, economic stagnation was the norm. While important inventions occasionally improved living conditions, sustained growth that continuously raised living standards for large populations was unheard of until the Industrial Revolution. Joel Mokyr, an economic historian, dedicated his research to answering why this changed so dramatically in the last 200 years. His work demonstrated that sustained growth became the new normal only when certain societal prerequisites were met.
Mokyr used historical sources to argue that a simple flow of inventions was not enough. He showed that for innovation to create a self-sustaining cycle of growth, society needed what he termed “useful knowledge.” This meant it was not enough to know that a new technique or machine worked; there also needed to be a scientific understanding of why it worked. Before the 18th century, this deeper understanding was often missing, which hindered the ability to improve upon or adapt new discoveries. He also emphasized the vital role of an open society that was receptive to new ideas and encouraged the spread of knowledge, which laid the foundation for the technological progress that powered modern economies.
The Engine of Creative Destruction
While Mokyr explained the historical conditions for growth, Philippe Aghion and Peter Howitt developed a powerful mathematical framework to describe the mechanism that keeps it going. Their work formalized the concept of “creative destruction,” an idea first popularized by economist Joseph Schumpeter. Through their model, they showed that the calm surface of steady national economic growth hides a constant and turbulent process of renewal at the firm level.
In the Aghion-Howitt model, companies invest in research and development to create new products or technologies. A successful innovation grants a firm a temporary monopoly and high profits, but it also renders the previous leading technologies and products obsolete, effectively destroying the market position of incumbent firms. This churn—where new businesses are created and over 10% of existing companies may close each year—is the essential driver of progress. Their model was the first to integrate this micro-level upheaval into a macroeconomic framework, showing how individual decisions and market competition translate into long-term national growth. Their research provides a foundation for analyzing modern policy questions, such as whether governments should subsidize research and development or how to foster innovation.
The 2025 Laureates
The three winners share a focus on innovation but come from different methodological traditions, combining historical analysis with quantitative modeling. Their joint recognition has been praised for broadening the lens through which economic growth is understood.
Joel Mokyr
Joel Mokyr was born in the Netherlands in 1946 and completed his Ph.D. at Yale University in 1974. He is a professor at Northwestern University in Evanston, Illinois. His work is grounded in deep historical analysis, and he has authored numerous books and articles on the economic history of technology and the intellectual origins of the Industrial Revolution.
Philippe Aghion
Born in Paris, France, in 1956, Philippe Aghion earned his Ph.D. from Harvard University in 1987. He is a professor at the Collège de France, INSEAD, and the London School of Economics. During the announcement ceremony, Aghion said he would use his prize money to further his research into artificial intelligence and environmentally sustainable economic growth, noting that firms will not “spontaneously innovate green” without policy guidance like a carbon tax.
Peter Howitt
Peter Howitt was born in Canada in 1946 and received his Ph.D. from Northwestern University in 1973. He is currently a professor at Brown University in Providence, Rhode Island. His collaboration with Aghion began in the late 1980s, leading to their seminal papers on creative destruction and endogenous growth theory.
A Prize Rooted in Modern Economics
The economics prize is the final award of the Nobel season each year. The selection process is rigorous and shrouded in secrecy for 50 years. It begins each September when the prize committee sends thousands of invitations to university professors, members of academies, and former laureates, asking them to nominate candidates for the following year. The committee, a five-member body elected from the Royal Swedish Academy of Sciences, screens several hundred nominations and consults with experts to produce a final report. In early October, the full academy votes to select the laureates.
A Complicated History and Ongoing Debate
Despite its prestige, the prize in economic sciences is distinct from the five original awards established in the 1895 will of Alfred Nobel. It was created in 1968 through a donation from Sweden’s central bank, Sveriges Riksbank, to commemorate the bank’s 300th anniversary. This distinction has led some, including descendants of the Nobel family, to call it a “false Nobel” and argue that its creation was a public relations move by economists to elevate their discipline’s reputation.
The prize has also faced criticism for its perceived ideological biases. Some analysts argue that the award has disproportionately honored economists who favor free-market principles while marginalizing those with views critical of capitalism. Another point of contention is the lack of diversity among its recipients. Since its inception in 1969, 96 laureates have received the honor, but only three have been women, the most recent being Claudia Goldin in 2023 for her work on the gender pay gap. These debates highlight the unique and sometimes controversial position the economics prize holds within the Nobel tradition.
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