Why in the News?
The 2025 Nobel Prize in Economic Sciences (Sveriges Riksbank Prize in Memory of Alfred Nobel) was awarded to Joel Mokyr (Northwestern University, US), Philippe Aghion (Collège de France, INSEAD, LSE), and Peter Howitt (Brown University, US) for their pioneering explanations of innovation-driven economic growth.
What is the Nobel Economics Prize?
- Officially called the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel, established in 1968.
- It is NOT part of the original Nobel Prizes created by Alfred Nobel in 1895.
- Created by the Swedish central bank to honor Alfred Nobel’s legacy.
- Although not an original Nobel Prize, it is presented alongside the other Nobel Prizes on December 10, the anniversary of Nobel’s death.
- Includes a diploma, gold medal, and a one-million-dollar prize for the laureates.
Who are the Nobel Laureates for 2025?
- Joel Mokyr (Northwestern University, USA): An economic historian, renowned for studying how scientific knowledge, cultural openness, and institutional change during the Enlightenment triggered the Industrial Revolution.
- Philippe Aghion (Collège de France, INSEAD, LSE): A leading growth theorist, known for advancing the Schumpeterian model of innovation-driven growth and the economics of creative destruction.
- Peter Howitt (Brown University, USA): Collaborator of Aghion, co-developer of the Aghion–Howitt growth model, integrating firm-level innovation dynamics into macroeconomic theory.
Their Contributions:
- Joel Mokyr:
- Demonstrated that before the 18th century, societies possessed “prescriptive knowledge” (how things worked) but lacked “propositional knowledge” (why they worked).
- Showed that the Scientific Revolution merged science with craftsmanship, turning discovery into applied innovation.
- Highlighted that the Enlightenment’s intellectual openness enabled acceptance of “creative destruction,” allowing new technologies to replace old ones without institutional backlash.
- Philippe Aghion & Peter Howitt:
- Developed the 1992 Schumpeterian Growth Model, mathematically linking innovation, competition, and economic growth.
- Explained that constant firm turnover—where new innovators replace old incumbents—creates long-term, stable growth.
- Introduced the idea of “general equilibrium in innovation”, connecting household savings, financial markets, R&D investment, and production into a single dynamic framework.
