Nobel laureates in economics reveal the mystery of the rapid economic progress over the past 200 years.
The real breakthrough in the history of human economic growth occurred around 1820, just about 200 years ago.
At Beijing time on October 13, 2025, this year's Nobel Prize in Economics was officially announced. The award was given to three economists: Joel Mokyr, Philippe Aghion, and Peter Howitt. Among them, Mokyr received half of the prize money for "clarifying the necessary conditions for technological progress to drive sustained growth"; Aghion and Howitt shared the other half of the prize money for "proposing a theory of sustained growth driven by the process of creative destruction."
Although the research paths of the three scholars are not the same, John Hassler, the chairman of the Nobel Committee for Economics and a member of the Royal Swedish Academy of Sciences, explained the reasons for the laureates' winning in an interview with The Beijing News: They won the award for explaining the mechanism by which economic growth driven by technological innovation and improvement replaced stagnation as the economic norm. The three laureates used different methods for research: Joel Mokyr confirmed through a large amount of historical data that long - term sustained growth driven by technological innovation depends on three key elements: First, science and technology must be closely linked to form a positive feedback loop to promote the continuous accumulation of practical knowledge; Second, there must be a group of capable craftsmen and engineers to transform new ideas into products and production processes. Third, society must accept change, and interest groups that may be damaged by change have no right to prevent it. Since the end of the 18th century, these three elements have existed simultaneously in the UK. This was the first time in world history that such a situation occurred, and it is also the reason why the Industrial Revolution first emerged in the UK.
Philippe Aghion and Peter Howitt received the other half of the award for constructing a mathematical model of creative destruction, which is completely consistent with the process recorded by Joel Mokyr using the tools of economic historians. Having a mathematical model greatly complements Joel Mokyr's work. It can clearly distinguish various forces and driving factors behind "creative destruction" and helps analyze the types of policies required to maintain this process. Policies must provide sufficient incentives for technological improvement, ensure that free science is fully funded, protect the economy from the excessive dominance of certain enterprises, and help individuals who lose their jobs due to the decline in the competitiveness of their employers find new and better jobs.
John Hassler also said that for most of human history, economic growth was very limited. Although there were many important discoveries that improved living conditions, growth tended to level off. However, in the past two centuries, the situation has changed. "Sustained economic growth, driven by continuous technological innovation and improvement, has replaced stagnation," Hassler said. "The research of the three Nobel laureates shows that economic growth is not a given. We must maintain the mechanism behind creative destruction to prevent the economy from returning to a state of stagnation."
The Origin of Modern - Style Growth
In 1946, Mokyr was born into a Jewish family in Leiden, the Netherlands. His father was a civil servant, and his mother was a survivor of the Holocaust. During his undergraduate studies, Mokyr attended the Hebrew University of Jerusalem and obtained a bachelor's degree in economics and history from the university in 1968. Subsequently, he went to Yale University for further studies. In 1974, Mokyr completed his doctoral thesis Industrial Growth and Stagnation in Low - Income Countries from 1800 to 1850 and successfully obtained his doctorate. Then, he began teaching at Northwestern University and still works there today.
As a researcher of economic history, Mokyr focuses on the origin of modern growth. Although economic growth seems like a common thing to people today, in fact, truly continuous and stable economic growth is a phenomenon that only emerged in modern times. On October 13, Mokyr told Reuters that his research focuses on "why we are much richer and live much better than our great - grandfathers." At the same time, he is worried that during the Trump administration, the United States may lose its leading position in the fields of scientific research and education. "The current administration's attacks on higher education and scientific research may be the biggest 'own goal' in history," Mokyr said. "This behavior is self - destructive and is completely driven by irrelevant political factors."
At the press conference announcing this year's Nobel Prize in Economics, Aghion's speech accurately analyzed the current dilemma of the global economy. When a reporter at the scene asked the question "What is the impact of the US tariff hikes on growth?", he simply and neatly replied: "I don't welcome any tariff policies. Any tariffs are a stumbling block to growth."
Behind this statement is his judgment on the global economic competition pattern. "Trade barriers are not beneficial to our economic growth. We need larger markets to promote the continuous flow of trade. We hope to be able to cross technological boundaries and let science and technology flow across different national borders."
Among economists, Aghion is considered a "second - generation rich." His grandfather was a famous Egyptian Jewish banker, and his mother, Gaby Aghion, was the founder of the well - known French luxury brand Chloé, and was hailed as "the soul of the fashion on the Left Bank of Paris." According to Aghion's recollection, many names that later became world - famous often visited his living room. For example, Karl Lagerfeld, the former creative director of Chanel (from Hamburg, Germany), once helped him with his German homework when he was a teenager.
In 1987, Aghion obtained a doctorate in economics from Harvard University. After graduation, he became an assistant professor at the Massachusetts Institute of Technology. Two years later, he returned to France and served as a researcher at the National Center for Scientific Research. In 2000, he returned to his alma mater, Harvard, to teach. In 2015, at the invitation of French President Hollande, he returned to France to serve as an economic advisor. In the same year, he became a chair professor at the Collège de France and still holds the position today.
It is worth mentioning that Aghion has a deep connection with the Chinese academic community. As early as 1994, he came to China to participate in the "International Symposium on the Next - Step Reform of the Chinese Economic System" held at the Jinglun Hotel and put forward many useful suggestions for China's enterprise reform. In 2017, the paper he co - wrote on China's industrial policy issue won the Sun Yefang Award, the highest award in the Chinese economic circle.
Compared with Aghion, Howitt's background is not prominent, and his experience is relatively simple. In 1946, he was born in Canada and completed his doctorate at Northwestern University in the United States. In 1996, Howitt transferred to Ohio State University and joined Brown University in 2000 until his retirement in 2021.
The Interpreter of Schumpeter
In the academic circle, Aghion is well - known as an interpreter of the political economist Joseph Alois Schumpeter. In 1992, Aghion and Howitt jointly established the "Schumpeterian Growth Model." After that, Schumpeter's ideas really began to be taken seriously by the mainstream macro - economics community.
Like Mokyr, Aghion also believes that the explosive growth after the Industrial Revolution is a miracle. He pointed out that between AD 1000 and 2000, the global GDP increased by 300 times, and the per - capita income increased to 13 times the original level. In sharp contrast, in the previous 1000 years, the population only increased by 1/6, and the per - capita income level basically remained unchanged. The real breakthrough in the history of human economic growth occurred around 1820, just about 200 years ago. Therefore, the per - capita GDP growth that we take for granted today is actually a very recent phenomenon on the large scale of human history. Between 1000 and 1820, the average growth rate of global per - capita GDP was very low, less than 0.05% per year. From 1820 to 1870, this growth rate increased to 0.5%, and from 1950 to 1973, it even reached 3% - 4%.
Economic growth is accompanied by the extension of human life expectancy. In AD 1000, the life expectancy of newborns was only 24 years, and one - third of them died before the age of 1. The turning point also appeared in 1820. Before that, the increase in life expectancy was very limited. The average life expectancy of newborns around the world was only 26 years in 1820, but after that, it entered exponential growth, reaching 66 years in 1999.
Aghion asked, why did the growth take off not occur until the early 19th century? Why did inventions before the Industrial Revolution, such as the wheel, the printing press, or the compass, not bring about cumulative growth? Why did all these changes start from the small European country of the UK, rather than many large countries with a long history of civilization?
Part of the answer given by Aghion and Howitt was to introduce the concept of "creative destruction" proposed by Schumpeter in Capitalism, Socialism and Democracy into the economic model. In their model, technology is the most important intermediate product in economic production. Without technology, production cannot be carried out. And these technologies are provided by entrepreneurs. Once an entrepreneur has leading technology, then he has market power and can obtain excess profits. In order to obtain these excess profits, thousands of entrepreneurs in the economy have the motivation to continuously invest resources in research and development. Of course, these R & D efforts are risky, but once successful, new technologies can replace old technologies and become the mainstream. At the same time, the incumbents who originally held a monopoly position and could reap high profits will be overthrown, and new winners will take their place. In this way, the entire economy realizes "creative destruction": the old technologies and everything related to them are destroyed, while new technologies and everything related to them emerge.
The Enlightened Economy
Author: [US] Joel Mokyr
Publisher: CITIC Publishing Group
Subtitle: A New History of the British Economy
The Enlightened Economy:
Britain and the Industrial 1700 - 1850
The author combines economic history, political history, social history, especially intellectual history, to comprehensively examine the economic development of the UK in the century and a half after 1700. It powerfully demonstrates that the creativity brought about by the Enlightenment and the belief in social progress and scientific and technological development influenced the economic behaviors of British thinkers, inventors, entrepreneurs, and craftsmen, leading the UK into the Industrial Revolution and modern economic growth.
◎ When explaining the causes of the Industrial Revolution and modern economic growth, two independent questions are involved. One of them is the "big question," that is, why Western Europe was able to achieve what no society in history had ever achieved, that is, to break through various negative - feedback barriers? Such negative - feedback barriers caused most of the population before 1800 to struggle in extreme poverty, while hardly anyone in Western countries lives in such poverty today. Although the Ottoman Empire, China, and India had achieved remarkable scientific and technological achievements, they were far left behind at that time. There are a variety of answers to this question. Some answers are strange (climate, race, religion), while others seem reasonable but are difficult to prove, such as culture, society, empire, and politics.
◎ Economic changes in any period depend on what people believe, and to a greater extent than most economists think. This was the case with the economic development of the UK from the "Glorious Revolution" to the Great Exhibition in the Crystal Palace. In addition to geographical factors and standard arguments such as the roles of the market, politics, and society, the origin of modern economic growth largely depends on people's cognition and beliefs, and how these beliefs affect their economic behaviors. The 18th century was the Age of Enlightenment, and it is necessary to fully examine the economic impact of this fact. As Hegel pointed out, ideas and philosophy inspire people to build the real world; the French Revolution and the American War of Independence strongly prove this.
◎ Before the Industrial Revolution, economic growth was mediocre. It was not only slower than what economists today consider "normal" economic growth but also qualitatively different. In today's era, economic growth highly depends on technological progress and the accumulation of improved means of production, new skills, and competence. The accumulation of factors such as technological progress and means of production represents and promotes innovation. Although the world had achieved technological progress before 1750, they only played a secondary role in driving economic changes. Between 1450 and 1750, the volume of trade increased significantly, and Western Europe benefited particularly. The growth of trade was largely due to the increase in useful knowledge: ship design and navigation technology were improved, geographical knowledge was expanded, and new trade routes and trading partners were found. In addition, various institutions were improved to strengthen the "rule of law," thereby promoting the development of trade. The institutions were dedicated to eradicating pirates, improving the enforcement of contracts and property rights, reducing risks, providing credit, insurance, and information, and providing reasonable guarantees to ensure that trading partners fulfilled their promises.
◎ During the Golden Age of the 17th century, the Netherlands became a wealthy country, partly due to its shipping and commerce. Another reason was that it relied on industries such as canvas weaving, papermaking, and sugar - making that relied on or served international trade and was able to improve productivity and compete through innovation. However, the engine driving such development was usually commerce and institutional improvement, and technology only provided auxiliary power. Around 1750, everything began to change. The most appropriate definition of the Industrial Revolution is a series of events that placed technology at the main engine of economic change. Compared with 1400, the daily consumer goods available to ordinary British people in 1700 were much more abundant. Most scholars estimate that the economic growth rate before 1750 was between 0.2% and 0.3%. At this growth rate, per - capita income doubled every 250 to 300 years.
◎ For most of recorded history, the number - one enemy of economic growth was not population pressure but exploiters, pirates, and parasites. Economists euphemistically call parasites "rent - seekers." Rent - seekers are reluctant to engage in economic production activities and think it is easier to rob and plunder the fruits of others' labor. Rent - seekers include tax collectors of kings or bishops, highway robbers, corrupt officials, greedy local monopolies, guilds that strictly control entry and production activities, or invading armies from neighboring countries. Their aggressive rent - seeking behavior often led to the cessation of economic activities, and growth depends on economic activities. In this case, from a real dialectical relationship, growth dug its own grave and created the conditions for its own decline. Wealthy cities such as Milan, Antwerp, and Magdeburg aroused the jealousy and greed of powerful neighbors; the latter besieged, looted these cities, and taxed them. Only a few regions such as Venice and the coastal provinces of the Dutch Republic were able to survive due to their unique geographical features. However, even so, they had to use most of their economic surplus for defense.
◎ The UK was extremely lucky in two aspects. First, as an island country, the security threats it faced were not so urgent. However, as the Spanish Armada proved, the UK was not completely free from security threats. Moreover, being an island country is not a sufficient condition to resist foreign invaders and plunderers (Ireland and the Philippines unfortunately learned this), but it is still an advantageous condition. In addition, it is not enough to just stop foreign looters, because most rent - seeking activities are carried out by local notables and bullies. In the 17th century, British society was extremely effective in restricting the most powerful local bully, that is, the king. The British believed that rulers could not levy taxes without the consent of the people. This principle was reflected in Article 4 of the 1689 Declaration of Right ("Levying money for and to the use of the Crown... without grant of Parliament... is illegal"), which should be regarded as an important step for the UK in restricting such rent - seeking activities.
◎ Early industrialists found that in order to build a labor force, they needed to influence the behavior of workers through social control and restraint. They established complex incentive systems. Some business managers such as Robert Owen believed that if workers were treated reasonably and humanely, these values would naturally emerge. Others usually preferred to hide the "carrot" and wave the "stick," such as fines, immediate dismissal, and in many cases, corporal punishment. Although economic factors determine that people will respond to incentives, culture and institutions determine whether incentives appear in the form of rewards or punishments.
◎ The typical firms during the Industrial Revolution were managed by owners or major partners. Schumpeter pointed out that at that time, entrepreneurs usually also served as technical experts, purchasers, salesmen, personnel managers, legal advisors, etc., in addition to being capitalists. Many early industrialists were highly skilled in technology, creative, and resourceful.
◎ Factories brought new problems to be solved, including labor control and management problems.