​Evolution, revolution: On the Nobel Prize in Economic Sciences 2025

The 2025 Nobel Prize in Economic Sciences has been awarded to Philippe Aghion, Peter Howitt and Joel Mokyr, who have, over decades, attempted to explain humanity’s unprecedented progress over the past two centuries. While Mokyr has provided the long historical and cultural context, Aghion and Howitt have given it a formal mathematical frame or the “creative destruction” model. The idea itself is older. It originates with economist Joseph Schumpeter, who described capitalism as an evolutionary system in which innovation continuously displaces old technologies, firms and industries — a process both creative and destructive. But Schumpeter’s framework rested on certain assumptions: that markets are free, competition is open, and the state acts only as an enabler of private enterprise, not as a driver of innovation. This assumption sits uneasily with the historical record. The long vision of the erstwhile Soviet state, and now the Chinese model of developmental capitalism, reveal how the state itself can shape and direct innovation. The creative destruction model, refined by Aghion and Howitt in the early 1990s, emerged during the twilight years of the Cold War, just as the Washington Consensus and neoliberalism became the dominant global economic paradigm. These models reinterpreted Schumpeter’s idea in mathematical form through the endogenous growth theory — the notion that long-term growth is generated not by external forces but by innovation, education, and research arising within the economy. Crucially, it assumed that competition and private incentives — not central planning — are the engines of technological progress.

But the Nobel recognition comes at a time when the very conditions for this model to succeed have been upended by U.S. President Donald Trump. His administration has weaponised global trade, politicised science and technology, and turned markedly protectionist, departing from the open, rent-seeking capitalism of the post-war American economic order. While the creative destruction and endogenous growth models remain powerful tools to understand progress within a specific system — that of neoliberal capitalism — they fail to explain the exponential technological advances of state-led economies such as China. These models also overlook how geopolitics, institutional fragility and widening inequalities can reshape the very structure of innovation. It is thus telling that the Nobel Committee has chosen to honour a framework whose ideal conditions — liberal markets, global openness, and scientific freedom — are under strain. This perhaps must be viewed as a warning that for liberal democracies to thrive, they must not renege on the ideals of institutional freedoms within state-enabled capitalist societies.