Laureates: Joel Mokyr, Philippe Aghion, and Peter Howitt
Awarded For:
Their pioneering research on innovation-driven economic growth — explaining how societies transition from stagnation to sustained progress through continuous technological and institutional innovation.
Nobel Prize in Economic Sciences 2025 Highlights
- Announced by: Royal Swedish Academy of Sciences
- Official Title: Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel
- Established by: Swedish Central Bank (Sveriges Riksbank) in 1968 to commemorate its 300th anniversary.
- Nature of Prize: Not part of Alfred Nobel’s original will (1895) but recognized and administered under the Nobel Foundation.
- First Awarded: 1969 to Jan Tinbergen (Netherlands) and Ragnar Frisch (Norway).
Theme of 2025 Award
The 2025 Nobel in Economics recognized groundbreaking contributions that explain why modern economies grow while past ones stagnated. It emphasizes that innovation, openness, and institutional tolerance for disruption are crucial for long-term economic progress.
Joel Mokyr- The Foundation for Sustained Growth
- Focus: Historical roots of modern economic growth.
- Key Insight: Before the Industrial Revolution, societies had isolated inventions but lacked systemic frameworks to sustain innovation.
- Concepts Introduced:
- Prescriptive Knowledge: Know-how (what works).
- Propositional Knowledge: Scientific understanding (why it works).
- Main Findings:
- Sustained growth requires interaction between science and practical application.
- The Scientific Revolution (16th–17th centuries) laid the foundation for the Industrial Revolution.
- Institutional openness, such as Enlightenment-era Britain’s support for innovation, reduced resistance to change.
Philippe Aghion and Peter Howitt- The Engine of Creative Destruction
- Key Contribution: Developed the Endogenous Growth Model (1992) based on Joseph Schumpeter’s concept of creative destruction.
Core Idea:
- Innovation replaces old technologies, propelling productivity and growth.
- Firms invest in R&D to gain temporary monopoly profits, which fuel further innovation cycles.
Model Characteristics:
- Growth arises from within the system (endogenously) — not from external forces.
- Temporary monopoly power is essential to incentivize R&D, but long-term monopolies stifle innovation.
- Policy Implication: Economies must balance protection of innovators and promotion of competition.
Innovation as the Driver of Modern Economic Prosperity
- Innovation enhances productivity, creating more output from the same resources.
- It drives technological advancement, job creation, and rising living standards.
- Through creative destruction, outdated systems are replaced, fostering a self-sustaining cycle of progress.
Global Relevance:
- Supports solutions for climate change, digital transformation, and public health.
- Encourages knowledge-driven economies and evidence-based policymaking.
India’s Innovation Landscape
- India is emerging as a global innovation hub, ranking among the top countries for patent filings in pharmaceuticals, IT, and digital technologies.
Key Innovations:
- UPI (Unified Payments Interface): Revolutionized financial inclusion, enabling billions of monthly transactions.
- Frugal Innovation: Affordable medical devices and cost-effective space technologies (e.g., Chandrayaan, Mangalyaan).
- Pharmaceutical Leadership: India is the “Pharmacy of the World,” supplying affordable medicines globally.
Institutional Frameworks Supporting Innovation:
- Atal Innovation Mission (AIM)
- Startup India Mission
- Digital India and Make in India
Contemporary Relevance of the 2025 Nobel
AI and Market Dominance:
- Aghion warned that AI-driven firms could monopolize innovation, blocking new entrants.
- Policy solution: Regulate competition without discouraging innovation.
Deglobalization & Trade Barriers:
- New tariffs and protectionism can inhibit creative destruction.
- Open trade fosters technological diffusion and competition.
Green Innovation & Interest Rates:
- Transition to sustainable energy requires massive innovation.
- High interest rates (tight monetary policy) disproportionately harm small innovative firms, slowing green progress.
Conclusion
The 2025 Nobel Prize in Economics underscores that:
- Prosperity is not automatic.
- Innovation must be continuously nurtured.
- Openness to change and competition are essential to sustain growth.
Mokyr, Aghion, and Howitt collectively show that modern growth is a dynamic process of continuous creation and destruction, requiring strong institutions, scientific advancement, and policy adaptability.
About Nobel Memorial Prize in Economic Sciences
| Aspect | Details |
| Official Name | Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel |
| Established By | Sveriges Riksbank (Swedish Central Bank) – 1968 |
| First Awarded | 1969 (Jan Tinbergen & Ragnar Frisch) |
| Administered By | Nobel Foundation |
| Selection Body | Royal Swedish Academy of Sciences |
| Prize Amount | 11 million Swedish kronor (2024–25) |
| Funding | Endowment by Sveriges Riksbank in perpetuity |
| Field | Economic Sciences |
| Presentation Venue | Stockholm, Sweden (alongside other Nobel Prizes) |
| Relation to Original Prizes | Not part of Alfred Nobel’s 1895 will but integrated into Nobel Prize system |
| Purpose | To recognize contributions that confer “the greatest benefit to humankind” in economics |
Key Facts
| Static Aspect | Details / Relevance |
| Nobel Prizes Established | 1895 (Physics, Chemistry, Medicine, Literature, Peace) |
| Economic Sciences Added | 1968 (by Sveriges Riksbank) |
| Administered By | Nobel Foundation, Stockholm |
| Selection Authority | Royal Swedish Academy of Sciences |
| First Nobel Prize Awarded | 1901 |
| Indian Nobel Laureate in Economics | Amartya Sen (1998) – Welfare Economics |
| Notable Past Winners | Paul Krugman (2008), Robert Solow (1987), Esther Duflo & Abhijit Banerjee (2019) |
| Royal Swedish Academy of Sciences Founded | 1739 |
| Sveriges Riksbank Established | 1668 – World’s oldest central bank |
| Prize Ceremony Date | 10 December (Alfred Nobel’s death anniversary) |