The Engines of Progress

The 2025 Nobel laureates in economics show that prosperity depends not just on invention, but on the culture and institutions that dare to sustain it.

Philippe Aghion, Peter Howitt and Joel Mokyr

Each October brings global anticipation as the Nobel Prizes honour excellence across science, literature, peace and economics. This year, the 2025 economics prize went to Joel Mokyr, Philippe Aghion and Peter Howitt for explaining how curiosity and creative destruction power long-term growth - from the steam engine to artificial intelligence.

For centuries, economists have chased the question What truly drives economic growth? Early answers pointed to geography or natural resources, until resource-poor countries like Japan achieved rapid industrialization and challenged those assumptions. Later, the focus shifted to capital, policy, and institutions, with global bodies like the World Bank and IMF promoting stability and reform. Last year’s Nobel recognized the role of inclusive institutions in fostering prosperity. Yet these explanations, while important, remain incomplete. While geography shapes context, and institutions enable progress neither alone spark ideas. The 2025 Nobel adds a vital perspective that it is the cultural and policy environment that fuels sustained innovation, turning potential into progress.

From 2020 to 2025, the Nobel Prize in Economics has spotlighted transformative research on markets, institutions, innovation, and social policy. Highlights include auction theory (Milgrom and Wilson, 2020), labour economics and causal inference (Card, Angrist and Imbens, 2021), banking stability (Bernanke, Diamond and Dybvig, 2022), gender disparities (Goldin, 2023), and institutional inequality (Acemoglu, Johnson and Robinson, 2024). In 2025, Mokyr, Aghion, and Howitt were honoured for showing how curiosity-driven innovation and creative destruction underpinned by strong institutions fuel long-term growth. Collectively, these laureates underscore that efficient markets, resilient institutions and inclusive innovation drive enduring prosperity.

Ideas in Motion

Mokyr, economic historian at Northwestern University, traces technological progress to culture rather than necessity. In The Gifts of Athena and A Culture of Growth, he argues that innovation thrives where curiosity is prized, failure tolerated and intellect free. By distinguishing between knowing why things work and knowing how to make them work, Mokyr shows how their union during the Industrial Revolution turned sporadic invention into sustained growth. The great leap after 1800, he contends, stemmed less from crisis than from cultures that made curiosity an institution.

Aghion, from the Collège de France and the London School of Economics and Howitt, from Brown University, have revolutionized economic theory by giving mathematical precision to Joseph Schumpeter’s concept of creative destruction, demonstrating how innovation drives sustained long-term growth. Their 1992 model revealed that entrepreneurs drive progress by replacing outdated technologies, creating a cycle of competition, obsolescence, and renewal. Their later work emphasized that capitalism remains productive only when inclusive, warning that without safety nets and opportunity, creative destruction can lead to social fracture. Growth, they argue, is inherently uneven, but it thrives on the very churn that disrupts and renews.

The 2025 Nobel Prize in Economics celebrates a powerful intellectual bridge between Mokyr’s historical lens and the theoretical precision of Aghion and Howitt. Mokyr explains why innovation begins - through cultures that value curiosity, openness and the exchange of ideas - while Aghion and Howitt show how it endures, driven by incentives, competition, and the relentless cycle of creative destruction. Together, they offer a unified framework for understanding progress which spells that innovation is both a cultural and institutional phenomenon.

Aghion and Howitt’s model of creative destruction emphasizes that progress demands adaptation. Innovation is a paradox - it raises living standards and unlocks new possibilities, yet often brings disruption, job loss, and resistance. Companies like Kodak, Nokia, and BlackBerry, once dominant, were overtaken by digital photography and smartphone revolutions, showing how ignoring change can be fatal. Societies must cultivate cultures that embrace disruption, not fear it.

India’s learning

India’s innovation journey mirrors the insights of the 2025 Nobel laureates. From ISRO’s Mars mission to UPI’s digital revolution, India is harnessing a cycle of creative destruction where new technologies reshape sectors and spawn fresh enterprises. The rise of startups and digital infrastructure signals an economy learning to innovate from within, yet sustaining this momentum requires stronger foundations: academic freedom, increased R&D investment, public-private collaboration, and a culture that tolerates failure. Initiatives like Atal Innovation Mission and expanded STEM education nurture the inquiry Mokyr champions, while India’s pluralistic, open society offers fertile ground for the dynamism Aghion and Howitt describe. As Mokyr reminds us, growth begins in the mind and India’s future depends on embedding curiosity deep into its institutions.

The laureates’ work highlights key challenges for policymakers navigating innovation-led growth. Subsidizing corporate R&D can ignite breakthroughs, but the broader benefits often come from second movers, thus making knowledge diffusion essential. Equally, cushioning the social impact of creative destruction through retraining, mobility support, and strong safety nets helps societies embrace change without fear. A balanced approach creates a virtuous cycle where disruption drives progress and inclusion.

While the 2025 Nobel Prize celebrates a powerful synthesis of history and theory, it also invites thoughtful critique. Some argue that creative destruction romanticizes disruption, overlooking ecological costs and deepening inequality. Others question Mokyr’s Eurocentric framing and the challenge of quantifying cultural drivers of growth. Yet these debates underscore the depth of the laureates’ framework.

Economic growth has always owed as much to imagination as to machinery. The 2025 Nobel laureates remind the world that progress begins with those bold enough to ask “Why not?” and endures only when societies reply, “Go ahead.” Innovation, they suggest, is both a privilege and a duty that must be tempered by fairness and guided by compassion. For stability without innovation breeds stagnation, while innovation without empathy invites disorder. The art of progress lies in balancing the two. For India and the world, true progress will come not from copying others, but from bold imagination. Mokyr gave us the roots of innovation; Aghion and Howitt gave us its rhythm. The future depends on how well we bring both together.

(The author is a Chartered Accountant with a leading company in Mumbai. Views personal.)