By Prof D. Mukherjee
On October 13, 2025, the Royal Swedish Academy of Sciences announced that Joel Mokyr, Northwestern University; PhD Yale, Philippe Aghion, Collège de France , INSEAD; PhD Harvard and Peter Howitt, Brown University; PhD Northwestern, had been awarded the Nobel Prize in Economic Sciences—formally known as The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. The award recognized their outstanding contribution to explaining innovation-driven economic growth, a theme that revitalizes Joseph Schumpeter’s enduring notion of creative destruction. Their combined scholarship demonstrates that economic expansion depends on open institutions, competition, and continuous renewal—not just invention, but the systems that sustain it. Precisely, the 2025 Nobel recognition affirms that sustained economic growth is not an automatic process but a fragile achievement. For much of human history, societies remained stagnant despite periods of inventive brilliance. Only with the rise of scientific rationality, open institutions, and market driven competition did innovation begin to reproduce itself in a self-sustaining cycle. Mokyr, Aghion, and Howitt’s combined work provides a comprehensive explanation of both the conditions that allow modern growth to emerge and the mechanisms that enable it to endure through continuous innovation.
The 2025 Nobel Prize in Economic Sciences was shared between Joel Mokyr, Philippe Aghion, and Peter Howitt, reflecting two interlinked dimensions of the same enduring question: why do some societies achieve lasting growth while others remain stagnant, and what sustains that growth over time? The Royal Swedish Academy’s decision to divide the award symbolized a meeting of history and theory—uniting Mokyr’s cultural and historical insights with Aghion and Howitt’s analytical modelling of innovation. Joel Mokyr represents the historical and intellectual foundation of progress. His research reveals that modern economic growth was not merely the result of technological invention but of a deep transformation in how societies generated and shared knowledge. By linking scientific reasoning with practical craftsmanship, Mokyr shows that growth flourishes in societies that value discovery, openness, and tolerance for new ideas. In contrast, Philippe Aghion and Peter Howitt developed a formal model of creative destruction, expanding Joseph Schumpeter’s idea of renewal through innovation. They describe economic growth as an ongoing cycle where each new discovery replaces the old, driving competition and continuous improvement. Together, their perspectives form a unified vision of progress—one that blends cultural evolution with structural dynamism, revealing growth as both a social and intellectual achievement.
Joel Mokyr’s scholarship reinterprets the history of economic progress as a story of ideas rather than merely inventions. He asks why, despite abundant creativity, pre-modern societies could not sustain technological momentum. His answer lies in the absence of an intellectual and institutional environment that nurtured discovery as an ongoing process. Before the Industrial Revolution, innovation surfaced sporadically but failed to persist because rigid guild systems, hierarchical traditions, and political resistance prevented new ideas from spreading or accumulating.
Mokyr locates the true turning point not in the sudden appearance of machinery, but in the transformation of knowledge itself. He distinguishes between prescriptive knowledge—the practical know-how of artisans—and propositional knowledge—the scientific understanding of underlying principles. For centuries, these realms operated separately; only when science began to illuminate practice, and practice in turn refined science, did self-sustaining growth emerge.
This fusion, alongside the rise of skilled entrepreneurs and the development of open, tolerant institutions, created the cultural ecosystem for modern progress. Mokyr thus reframes economic growth as both an intellectual and moral evolution. Prosperity, he argues, arises where curiosity is encouraged, experimentation rewarded, and knowledge freely exchanged—revealing that the foundations of growth are ultimately cultural as well as economic.
Philippe Aghion and Peter Howitt transformed Joseph Schumpeter’s idea of creative destruction into a precise analytical model, revealing how innovation sustains economic growth. Their 1992 endogenous growth framework shows that progress stems from a continuous cycle where new technologies replace old ones, granting innovators temporary monopoly profits that motivate research and risk-taking. Yet these monopolies must remain open to challenge—if incumbents block new entrants, innovation falters. By linking competition, policy, and technological renewal, Aghion and Howitt demonstrated how dynamic, open markets drive sustained economic advancement.
Joseph Schumpeter’s seminal concept of creative destruction, introduced in Capitalism, Socialism and Democracy (1942), remains central to understanding capitalism’s restless dynamism. He portrayed capitalism as an ongoing process of “industrial mutation,” where innovation continuously reshapes the economy by dismantling old structures and creating new ones. Entrepreneurs, in his view, were the catalysts of this perpetual renewal—driving technological revolutions that advanced progress but also risked giving rise to monopolies that could suppress further innovation. The 2025 Nobel winers have reinvigorated Schumpeter’s vision for the twenty-first century, extending it from the industrial to the digital and AI era. Mokyr redefines Schumpeter’s entrepreneur as a participant within a broader cultural and institutional ecosystem. For him, innovation endures only when societies foster openness, scientific collaboration, and tolerance for disruption—conditions that allow creativity to circulate freely through shared knowledge networks. Aghion and Howitt, meanwhile, gave Schumpeter’s intuition mathematical precision through their endogenous growth model. They demonstrated that innovation is a cumulative process sustained by competition and temporary monopoly rewards. In today’s AI-driven economy, their theory underscores a new paradox: while artificial intelligence accelerates innovation, its concentration among a few powerful firms risks stifling future creativity. The laureates’ reinterpretation thus restores Schumpeter’s insight to contemporary relevance—reminding us that creative destruction must be governed with fairness, openness, and foresight.
The synthesis of these ideas underscores a defining principle of modern economics: innovation is the central engine of prosperity. It enhances productivity, enables efficient use of resources, and raises living standards. Through the recurring process of creative destruction, outdated technologies are replaced by superior alternatives, generating new industries and employment while ensuring the economy adapts to changing needs.
Innovation is not a static achievement but a living process that demands institutional support and societal resilience. The laureates’ combined work demonstrates that nations flourish when they transform invention into a continuous habit, embedding curiosity, experimentation, and adaptability into their economic DNA.
India’s recent trajectory offers a vivid example of innovation’s transformative potential. The nation has emerged as a leading global innovation hub, excelling in pharmaceuticals, information technology, and space research. The Unified Payments Interface (UPI) exemplifies digital inclusion, enabling billions of secure transactions monthly and redefining financial access. India’s advances in frugal engineering, low-cost healthcare devices, and cost-efficient space missions illustrate how innovation can simultaneously promote growth and social equity.
India’s experience mirrors the Nobel laureates’ insights: Mokyr’s emphasis on openness and knowledge diffusion is evident in India’s expanding digital public infrastructure, while Aghion and Howitt’s model of continuous innovation resonates with the entrepreneurial dynamism of its start-up ecosystem. The nation’s challenge lies in sustaining this momentum by protecting competition, investing in education, and nurturing an environment where creativity and enterprise reinforce each other.
In the twenty-first century, humanity faces a convergence of technological, economic, and environmental challenges that echo the core themes explored by Nobel Scholars. Their frameworks—rooted in cultural openness, innovation-driven growth, and institutional adaptability—offer a unifying lens to interpret today’s shifting global landscape. From the dominance of artificial intelligence to the retreat of globalization and the urgent call for green innovation, each dilemma circles back to Schumpeter’s central question: how can societies sustain creative destruction without allowing it to collapse into stagnation or inequality?
The rise of artificial intelligence embodies both the promise and peril of modern capitalism. AI has the potential to revolutionize productivity and human welfare, yet it risks concentrating innovation in the hands of a few firms that control vast data ecosystems. Aghion cautions that such concentration could morph creative destruction into creative entrenchment, where technological leaders suppress competition. To preserve dynamism, policymakers must safeguard market contestability, promote open data access, and encourage startups that challenge incumbents—thereby keeping innovation both inclusive and democratic.
In global trade, similar patterns emerge. Protectionist tendencies threaten the openness that has historically fuelled progress. Aghion and Mokyr’s research converge on a vital insight: societies that resist foreign competition and the exchange of ideas ultimately stagnate. Innovation thrives in open systems—those that welcome intellectual diversity and cross-border collaboration.
The green transition presents an equally complex test. Building sustainable economies requires constant technological renewal, yet restrictive fiscal and monetary conditions often inhibit the smaller firms driving ecological innovation. According to Aghion and Howitt’s theory, these disruptive entrants are essential to dismantle entrenched, polluting industries.
Collectively, the laureates remind us that growth depends on adaptive institutions and openness to change. True progress lies not in shielding economies from disruption, but in directing creative destruction toward shared, sustainable prosperity
The 2025 Nobel Prize in Economic Sciences reaffirms one of humanity’s greatest achievements—the transition from centuries of stagnation to an era of sustained, innovation-driven growth. By honouring Joel Mokyr, Philippe Aghion, and Peter Howitt, the Royal Swedish Academy acknowledged not only groundbreaking economic theory but also a profound narrative of human adaptability and progress. Their collective work weaves together history, culture, and analytical rigor, revealing how societies evolve through the continuous interplay of discovery, competition, and renewal.
At its essence, their contribution revitalizes Joseph Schumpeter’s idea of creative destruction—the process through which capitalism reinvents itself by replacing the old with the new. Mokyr situates this dynamism within the moral and intellectual culture of open societies, emphasizing that true progress begins in the human mind—with curiosity, dissent, and the courage to innovate. Aghion and Howitt transform this vision into a structured model, illustrating how growth endures through competition, incentives, and responsive institutions.
Together, they provide a framework for addressing the dual nature of modern growth: its power to create prosperity and its potential to concentrate wealth and disrupt stability. Their insights call for balanced governance—policies that protect openness, encourage innovation, and ensure that markets remain contestable.
For emerging economies such as India, their message is particularly relevant. Innovation must become a sustained social habit, not a sporadic achievement. The laureates ultimately remind us that prosperity depends not on preserving the status quo but on embracing and guiding the creative turbulence that propels humanity forward.
(TheAuthor is Director-‘INSPIRE’ and former Professor & Dean-Faculty of Management, Humanities & Social Sciences, Law, and Commerce & Finance , SRM University, Delhi-NCR)
