Commentary: The Nobel Prize’s Timely Reminder on Growth

The 2025 Nobel Prize in Economic Sciences was awarded to Philippe Aghion, Peter Howitt, and Joel Mokyr for their substantial contributions to the theory of “innovation-driven economic growth”[para. 1]. Their recognition comes at a pivotal moment, when the global economy faces shifting growth drivers, slowing productivity, and transformations in technological paradigms. Amidst these challenges, the selection of these three economists marks a renewed mainstream focus on development issues within economics, emphasizing the power of theory to address real-world economic challenges[para. 2].

Aghion, Howitt, and Mokyr have each refined the framework of innovation-growth theory from unique perspectives. Aghion and Howitt’s "creative destruction growth model" unveils the internal mechanics of technological progress, focusing on how continuous competition and disruptions drive advancement. Mokyr, as an economic historian, emphasizes that innovation’s sustainability relies on the external institutional environment[para. 3]. Collectively, their research demonstrates that innovation is not a random event but rather an endogenous feature of economic growth, which depends crucially on institutional structures and incentive mechanisms[para. 3].

This body of work provides a valuable explanation for current trends toward innovation-led growth worldwide—an insight particularly relevant to China as it transitions toward high-quality, innovation-driven development. China’s strength lies not only in its R&D capabilities but also in its institutional and market infrastructure, which enables the transformation of innovation into industrial competitiveness. This aligns with national strategies focusing on quality productive forces, implying the necessity of transforming innovation into tangible economic growth—a core concept in the laureates’ work[para. 4].

The Nobel committee’s choice signals a timely return of economic debate to foundational questions about the sources of growth. The awarded scholars offer a systematic theoretical explanation: economic progress is primarily fueled by ongoing technological innovation, not mere capital accumulation. Growth is seen as evolving through "creative destruction," where new ideas displace old industries in a process that propels productivity and structural change. This interpretation builds on and formalizes Joseph Schumpeter’s pioneering ideas in a modern economic context—a perspective increasingly relevant against the backdrop of contemporary economic stagnation and transformation[para. 5][para. 6][para. 7].

Aghion and Howitt addressed sustained growth through formal models, explaining how dynamic competition and constant technological turnover produce enduring advancement, surpassing the limits of traditional, capital-focused models[para. 8]. Mokyr broadened this by arguing that the persistence and magnitude of innovation depend on societal institutions—property rights, competitive markets, education systems—that support knowledge accumulation and diffusion[para. 9][para. 10].

Their collective theory suggests that innovation-driven growth hinges on creating and maintaining social and institutional mechanisms that foster and reward innovation. In practical terms, this means that property rights, education, financial systems, and competitive environments are prerequisites for translating innovation into widespread productivity gains[para. 11].

The implications for global and Chinese policy are significant. Economies must shift from capital-driven to innovation-driven growth, focusing on cultivating robust innovation ecosystems that link research, education, and finance[para. 12]. China’s structural shift toward innovation is advanced by its industrial scale, talent, and R&D investments. To continue to move up the value chain, China and other developing nations must build institutions capable of sustaining innovation, rather than relying on cost advantages alone. The nation’s recent strategies, such as “new quality productive forces” and “sci-tech self-reliance,” reflect this necessity and align with the Nobel laureates’ theoretical insights[para. 13].