Inspiration from the Nobel Prize: Technological innovation is a continuous social transformation.

On October 13th, the Royal Swedish Academy of Sciences decided to award the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2025 to Joel Mokyr, Philippe Aghion, and Peter Howitt "for their elucidation of innovation-driven economic growth."

Half of the prize money was awarded to Mokyr "for discovering the prerequisites for sustained growth through technological progress," while the other half was jointly awarded to Aghion and Howitt "for their theory of sustained growth through creative destruction."

I. Mokyr and His Evaluation

Since Joel Mokyr received a larger share of the prize money, here I mainly introduce Mokyr's life and academic achievements.

Joel Mokyr is a well - known economic historian. Scholars researching economic history should have read his papers. Economic history has a low status in the field of economics and is at the bottom of the academic hierarchy. Many studies in this field are prone to being ridiculed by peers and historians. However, like the research done by Mokyr, it is very important.

Mokyr is a Dutch - American economic historian. He was born in Leyden, the Netherlands, in July 1946. He obtained a bachelor's degree in economics and history from the Hebrew University of Jerusalem in Israel in 1968, and a master's and a doctor's degree in economics from Yale University in the United States in 1972 and 1974 respectively. After graduation, he taught at Northwestern University in the United States and served as the head of the economics department from 1998 to 2001. Currently, he is the Robert R. Struthers Professor of Humanities and Sciences, a professor of economics and history at Northwestern University, and the Sackler Professor at the Eitan Berglas School of Economics at Tel Aviv University.

Perhaps Mokyr's complex experiences spanning Europe, the United States, and Israel provided him with the interest and opportunity to study history. Like many economic historians, Mokyr has a wide range of knowledge and is a prolific scholar. His representative works include The Lever of Riches: Technological Creativity and Economic Progress and A Gift of Athena: Historical Origins of the Knowledge Economy.

However, Mokyr's research is very well - structured. He first chose a major question that Adam Smith initiated in modern economics: why does the economy (wealth) grow? He investigated the driving force of economic growth through quantitative analysis.

Mokyr started from the Industrial Revolution to study the role of technological progress and knowledge accumulation in economic growth. His research led to some conclusions: there is non - equilibrium in technological change, such as the sudden occurrence of the Industrial Revolution; there are both major and minor inventions in technological progress, and they interact to promote economic growth.

These conclusions may seem commonplace to everyone. However, as an economic theory research, Mokyr made a contribution here. Like Romer, he incorporated technological progress into the research of endogenous growth.

Then, Mokyr looked for the reasons for technological progress and analyzed it from many aspects such as geographical conditions, institutions, government, and population. He believed that technological progress requires certain conditions: creative talents, institutional incentives for creation, and inclusiveness and diversity.

In the process of this research, Mokyr linked the Enlightenment with the Industrial Revolution. He believed that the Enlightenment promoted the spread of useful knowledge and triggered the "Industrial Enlightenment" movement.

Mokyr paid attention to the role of some details in technological and knowledge progress, such as the apprenticeship system in the UK and entrepreneurship.

Then, Mokyr's research turned in the opposite direction. Like many economic history studies, through national case comparisons, he demonstrated what factors hindered the occurrence of the Industrial Revolution. His doctoral thesis Industrial Growth and Stagnation in the Low Countries: 1800 - 1850 is a comparative study of the Industrial Revolution in the Low Countries.

We usually ask questions like why the Industrial Revolution did not occur in China but in the UK, and why Ireland, which is adjacent to the UK, missed the Industrial Revolution. Mokyr gave many reasons, including high transaction costs, lack of entrepreneurship, insufficient capital, and institutional suppression.

Then, Mokyr expanded his research from focusing on technological progress to the impact of population, human capital, capital accumulation, basic institutions, and interest groups on the economy. In the later stage, like many economic history scholars, Mokyr focused his research on culture and tried to explain the problem of economic growth from the perspectives of traditions, ideas, and values.

In addition, the main academic contributions of the other two laureates, Aghion and Howitt, are to construct the "creative destruction" model, which is to model Schumpeter's classic theory and explain how enterprises promote economic growth through disruptive innovation.

Here are some simple evaluations of the three laureates:

First, when you read Mokyr's works, you will find rich historical materials, detailed descriptions, and rigorous arguments. Some of his conclusions are eye - opening. Of course, this is a characteristic of many economic history studies and also the reason for Mokyr's academic success. Those who like this kind of research will love it.

However, like many quantitative economic history studies, due to economists' insufficient training in historical research, in the eyes of historians, these studies are obsessed with technology and may not be well - received by economists either. In fact, economic history research is very challenging. For example, when explaining why the Industrial Revolution occurred in the UK, every aspect seems to be able to provide an explanation, but none of them seems rigorous enough. As for what the most important factor is, who knows. So, it is not difficult to achieve results in economic history research, but it is also easy to be criticized.

Second, the research results of the three laureates seem like common sense to non - scholars, especially to the Chinese. This is actually a characteristic of humanities and social science research, which tries to quantitatively prove most common sense. In other words, although these three well - known economists have published highly - cited papers (Mokyr wins by quantity), they always seem to lack the spark of wisdom.

Some people say that this year's Nobel Prize in Economics is the "egg" laid by Schumpeter, and the three laureates hatched it. Nowadays, when people talk about innovation, they always mention Schumpeter because he was the pioneer who discovered innovation and entrepreneurship. Although the three laureates' achievements in hatching the egg are undeniable, they seem to lack real - sense knowledge innovation, especially considering that they are economists researching innovation.

Third, although the academic achievements of the three laureates seem a bit dull, the news of their awards has still been widely spread. The reason is that their research has grasped major issues, especially in the current wave of the artificial intelligence revolution. Last year's laureate, Acemoglu, was in a similar situation. He was the "egg" of North and lacked groundbreaking wisdom. However, Acemoglu won the award with a large - scale production of papers and highly - cited academic achievements. The key is that he also grasped a major issue, that is, the impact of institutions on economic growth.

In recent years, the Nobel Prize in Economics has three major characteristics: high citation, empirical/quantitative research, and major issues (innovation, institutions, financial crises, poverty, asset pricing).

Next, I will explore several relationships, namely the relationships between technological progress and innovation, macroeconomics, institutions, and freedom.

II. The Relationship between Technological Progress and Innovation

Many people equate innovation with technological innovation. This narrow view of innovation is wrong and harmful.

Innovation is a spontaneous systematic project. Mokyr has a correct view that modern economic growth is a complex phenomenon that depends on the comprehensive changes in society, politics, and technology. Technological innovation, especially major technological innovation, is not only the innovation of scientists and engineers in the technical field but also the innovation and change in various fields such as law, politics, social organizations, business organizations, financial systems, and education systems.

Nowadays, countries around the world are paying attention to chips. The world's most advanced chips are surely the result of the cooperation of the world's best talents. These talents include not only scientists and engineers in many related fields but also entrepreneurs, investors, financial practitioners, lawyers, accountants, auditors, teachers, government officials, etc. Simply put, manufacturing chips requires financing, which needs a financial market. Managing the financial market requires designing institutions. Moreover, institutions are not static. Due to the competition in the financial market, institutions need to be continuously innovated to maintain their competitiveness. Today, if the stock market is not well - developed, how can technological innovation be successful? To develop the stock market well, institutional construction and a series of non - technological changes are needed.

Historical experience shows that each wave of technological revolution encourages social values to turn towards technology worship, leading to a large investment in science and engineering and a weakening of humanities and social sciences. In the later stage of each technological revolution, due to the weakening of humanities and social sciences, the construction of institutions, laws, ethics, and social organizations is insufficient. Technological feudalism rises, wealth distribution deteriorates, social structure becomes unbalanced, values are distorted, beliefs collapse, and finally, political turmoil and national wars occur, which in turn damage economic development and technological progress.

III. The Relationship between Technological Progress and Macroeconomics

When the macroeconomy enters a recession, many people pin their hopes on technological innovation. New industries and new - technology enterprises, especially unicorns, determine the future transformation and upgrading of the economy.

However, will technological innovation still occur if the macroeconomy is in recession?

According to Schumpeter's logic of creative destruction, when the economy enters a recession/depression period, entrepreneurs have to seek breakthroughs through innovation. The mass production and market entry of new technologies and new products create new demand, which promotes price recovery and economic recovery. This is the logic of how micro - innovation changes the macro - trend.

Take Japan as an example. Japan entered a long - term recession in the 1990s. Many enterprises went bankrupt, and large enterprises divested unprofitable industries and concentrated on R & D. Now, Japan has obtained world - leading technologies in some fields. This is the Schumpeterian paradigm.

However, we cannot ignore the fact that the Japanese government made many mistakes in this process, which led to the continuation of the major recession, and Japan almost missed the entire Internet era.

Now, in the financial era, the financial accelerator effect is likely to cause long - term macroeconomic depression. How can technological innovation emerge in the "long winter"? This is a test.

If the US stock market crashed in 2020 and the federal government and the Federal Reserve did not take timely measures to rescue the market or the rescue was ineffective, and the US entered a major recession, would there be this wave of artificial intelligence? Or, how many years would this wave be postponed? Undoubtedly, if the US financial market collapses, large - scale models would go bankrupt due to the broken capital chain on the eve of the artificial intelligence wave.

If wealth distribution is not improved and social security is not sound, effective demand and consumption cannot be increased. If monetary policy is not timely and fiscal policy lacks the effect of structural improvement, market expectations and investment confidence are difficult to boost. On the premise that the macroeconomy has not improved, we cannot rely solely on technological innovation to solve macro - problems once and for all.

In this era, economists should combine technological progress with macroeconomic (policy) research more.

IV. The Relationship between Technological Progress and Institutions

This is a topic that has been widely and deeply studied by new institutional economics and economic historians. New institutional economics usually explains the importance of institutions for innovation from the perspectives of property - rights institutions and transaction costs. In particular, the intellectual property protection system has an incentive effect on technological innovators. However, Mokyr does not think that the intellectual property system played an important role in the British Industrial Revolution.

Mokyr focuses on meta - institutions, that is, basic institutions. In modern times, sovereign states, democratic systems, free markets, and civil societies have developed through mutual influence. Many people intuitively and partially believe that the above four institutions are the conditions for technological innovation and economic progress. However, it is easier said than done to establish these basic institutions.

The research of Aghion and Howitt shows that the probability of successful innovation increases with the increase in the level of democracy. In other words, the correlation between democracy and innovation or growth is positive, and this positive correlation plays an important role in the economy.

Chinese scholars are not unfamiliar with the role of institutional construction in innovation, but their understanding of institutional change is insufficient. In fact, as China's economy has developed to the present, it is very important to understand the logic of institutional change.

I think Mokyr's most important contribution is that he combines technological progress with North's institutional change and Olson's interest groups. Specifically, technological progress promotes economic development, and economic development accumulates a group of interest groups. For their own interests, interest groups may suppress institutional change through political competition and even cause institutional regression, which ultimately hinders technological progress.

Mokyr's research shows that in a single economy, technological progress starts to solidify after reaching a certain point, and the speed of technological progress gradually slows down and finally disappears. This is the "Cardwell's Law". Mokyr found that in 18th - century Britain, rent - seeking activities were very common. Various regulations, restrictions, privileges, and monopolies were seizing economic interests, and the House of Commons, mainly composed of the landlord class, hindered institutional change.

However, Mokyr found that in multiple economies, due to more intense political competition, "Cardwell's Law" does not hold. It can be seen that political openness and competitive reform help break the control of vested interests and promote institutional change and technological innovation.

When thinking about institutional issues, we cannot assume that institutions are exogenous and expect "God's law to come to the world to solve all problems." Instead, we should think about how interest groups may consolidate their interests through political control and how individuals can promote institutional change through political competition using the thinking of dynamic games.

V. The Relationship between Technological Progress and Freedom

Freedom seems to be an unquestionable prerequisite for technological innovation. However, today, many social elites have begun to doubt this conclusion.

I think there is no problem with the logic. In a society without absolute freedom, where individuals cannot migrate, speak freely, or conduct transactions, how can there be innovation?

In today's era, there are almost no societies lacking absolute freedom, which leads to a real problem: what is the relationship between the tolerance of freedom and the level of innovation?

If a society lacks political freedom but has a certain degree of economic freedom, with administrative monopolies in some fields and free competition in others, some fields are not open while others are integrated into globalization, and the access threshold is even lower than that of developed countries. Scientists enjoy a higher social status, sufficient economic incentives, and personal freedom. To what extent can it stimulate technological innovation, and what level of technological innovation can be achieved?

To explain this real problem, we need to think about the relationship between innovation and freedom, and which is the means and which is the end. In the short term, freedom can be a means to promote innovation. But fundamentally, freedom should be the end.

However, there is a cost to the free market. To achieve the goal of freedom, individuals will weigh how much cost they should pay to obtain corresponding freedom or how much freedom they should give up. Hobbes believed that when a person chooses to transfer or give up rights, it is always because he wants to obtain some rights from the other party or gain other benefits through this behavior. In the private domain, this kind of weighing is essentially a market transaction and is Pareto - optimal.

However, in collective action or public choice, this kind of weighing about freedom is prone to opportunism. In some cases, people may choose to give up rights to ensure their own lives and safety. Hayek once gave the most severe warning about this behavior: those who are willing to give up freedom for security will end up with neither.

Finally, technological innovation is a continuous social change. When exploring technological innovation, we should not only think about a certain technology, company, or industry but also solve some major problems such as macroeconomics, institutions, and freedom.

This article is from the WeChat official account "Zhibenshe". The author is the editor - in - chief Qinghe. It is published by 36Kr with permission.