Nobel Prize for Joel Mokyr, Philippe Aghion, and Peter Howitt

Joseph Schumpeter never won the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (aka the Nobel Prize in Economics), because he passed away in 1950. However, his key ideas such as innovation-driven growth and creative destruction clearly planted the seeds that led to the work of this year's Nobel Prize winners, Joel Mokyr (Northwestern University), Philippe Aghion (Collège de France and INSEAD), and Peter Howitt (Brown University). Mokyr received his prize "for having identified the prerequisites for sustained growth through technological progress", while Aghion and Howitt received the prize "for the theory of sustained growth through creative destruction".

I have to admit that I have never read any of Aghion and Howitt's work, and although I am aware of Mokyr's work and have a keen interest in economic history (although it's not an area of active research for me), I haven't read in detail any of Mokyr's work either. The Nobel Prize Committee's citation noted:

Joel Mokyr used historical sources as one means to uncover the causes of sustained growth becoming the new normal. He demonstrated that if innovations are to succeed one another in a self-generating process, we not only need to know that something works, but we also need to have scientific explanations for why. The latter was often lacking prior to the industrial revolution, which made it difficult to build upon new discoveries and inventions. He also emphasised the importance of society being open to new ideas and allowing change.

Philippe Aghion and Peter Howitt also studied the mechanisms behind sustained growth. In an article from 1992, they constructed a mathematical model for what is called creative destruction: when a new and better product enters the market, the companies selling the older products lose out. The innovation represents something new and is thus creative. However, it is also destructive, as the company whose technology becomes passé is outcompeted.

In different ways, the laureates show how creative destruction creates conflicts that must be managed in a constructive manner. Otherwise, innovation will be blocked by established companies and interest groups that risk being put at a disadvantage.

John Hawkins also has an excellent article in The Conversation today that summarises their work. He also notes the lack of women, with this being the second consecutive prize awarded to a group of three men, and only three women in total having ever won the prize. Hawkins suggests that Rachel Griffith could have easily replaced Mokyr as a laureate. However, that does a disservice to Mokyr, whose stellar work, particularly on the importance of knowledge in explaining the Industrial Revolution and economic growth more generally, had been increasingly tipped for a prize in recent years.

Despite any gripes about who missed out this year, Mokyr, Aghion, and Howitt are worthy winners. You can read more about their work in the popular science summary on the Nobel website. Tyler Cowen also has some nice (and short) comments here.