Nobel Prize 2025: How Economists Explained What Pulled the World Out of Stagnation

The 2025 Nobel Prize in Economic Sciences has been awarded to Joel Mokyr, Philippe Aghion, and Peter Howitt for their groundbreaking explanation of innovation-driven economic growth. In essence, they answered one of history’s greatest questions: how did humanity, stagnant for millennia, suddenly break into an era of continuous prosperity?

Mokyr’s Insight: “From What to Why”

Economic historian Joel Mokyr (Northwestern University) showed that before the Industrial Revolution, innovations often fizzled out. Why? People knew what worked (for example, a particular mechanism) but not why it worked. Mokyr demonstrated that the key to self-sustaining growth was a societal shift — from recipe-based, practical knowledge to scientific understanding. Only when people grasp the underlying principles can they build an endless chain of new breakthroughs.

The “Creative Destruction” Model

Philippe Aghion and Peter Howitt took Joseph Schumpeter’s idea of “creative destruction” and, for the first time, gave it mathematical precision. Their model explains how new, superior products and technologies constantly enter the market, displacing older firms. This endless cycle of replacement is the very mechanism that ensures sustainable growth.

Committee’s Warning: Growth Is Not Guaranteed

The laureates’ work is not just an explanation of success, but also a warning. Technological progress always creates conflicts: those who lose out in the process (obsolete firms, outdated jobs) often resist innovation. The Nobel Committee emphasized that economic growth should never be taken for granted. If governments fail to manage these conflicts and allow threats such as monopolistic dominance or societal closed-mindedness, the engine of “creative destruction” can stall — and the world could once again slip back into stagnation.