Every year, a handful of economists earn a place in history. The Nobel Memorial Prize in Economic Sciences recognizes the people whose ideas change the way we think about wealth, work and the forces that drive economies. Since 1968, the Nobel in Economics has spotlighted research from long-term growth trends to the shocks of financial crises, mapping the forces that shape wealth across generations.
From past to present: How historical innovations shape today’s economy
This year, the Nobel Memorial Prize in Economic Sciences went to Joel Mokyr of Northwestern University, Philippe Aghion of the Collège de France and the London School of Economics, and Peter Howitt of Brown University. Their work, spanning decades and continents, focuses on how innovation drives economic growth and how new technologies inevitably replace the old in a process termed “creative destruction.”
Mokyr, an economic historian, looks to the past, examining centuries of industrial and technological change to understand how ideas shape prosperity. Aghion and Howitt, meanwhile, use mathematical models to explain how innovation spreads through economies, displacing older industries while creating opportunities for new ones.
They argue that important milestones in history, such as the Industrial Revolution, were not isolated events but the culmination of centuries of scientific inquiry, intellectual exchange and cultural openness. They posit that for innovations to succeed one another in a self-generating process, it is not enough to know that something works; we also need a scientific understanding of why it works.
Mokyr distinguishes between “propositional knowledge” (understanding why something works) and “prescriptive knowledge” (knowing how it works). Before the Industrial Revolution, most advances relied on practical know-how without the scientific understanding behind it, limiting progress. The fusion of these two forms of knowledge, Mokyr argues, was what ultimately sparked the Industrial Revolution of the 18th and early 19th centuries and modern economic growth.
Their philosophy stretches not only into how we view essential and revolutionary moments in economic history, but also how we understand our own progress as humans. It suggests that innovation is more than invention; it’s a reflection of our collective curiosity and drive to improve. Each leap forward stands as proof that humanity’s greatest strength lies in its ability to learn, adapt and build on the ideas of those who came before.
Creative destruction in the AI age
Creative destruction might sound like something out of a sci-fi movie, but it’s really just a way of describing how progress works. It’s the idea that for something new to thrive, the old has to give way—outdated businesses close, technologies evolve and industries are reshaped. It can feel messy or even unsettling in the moment, but it’s also the engine that drives innovation, creates opportunities and keeps economies moving forward.
According to findings from a May study of 2,000 business leaders by the IBM Institute for Business Value, we are witnessing the clearest example yet of an era of creative destruction. AI is transforming entire industries, replacing old processes with faster, smarter solutions and forcing companies to rethink how they operate. Jobs, workflows and business models are being reshaped at a pace rarely seen in history.
According to the study, the AI age is “burning away outdated habits that suffocate growth.” The authors add: “While it’s unclear what exactly will emerge from the ashes, this reset makes room for fresh ideas to flourish.” IBM reports that leadership teams are rethinking every aspect of their organizations in response to AI. The executives who lean into change, rather than resist it, are the ones thriving.
Progress builds on the foundations of the past
“The laureates have taught us that sustained growth cannot be taken for granted,” the Nobel committee said this week. “Economic stagnation, not growth, has been the norm for most of human history. Their work shows that we must be aware of, and counteract, threats to continued growth.” They added that Mokyr’s research highlights that for innovations to build on each other successfully, it’s not enough to know that something works—we also need a scientific understanding of why it works.
True progress doesn’t happen overnight, it grows from what’s already been achieved. Just as economies evolve by refining and expanding existing ideas, individuals and businesses succeed by doing the same. Lifelong learning, curiosity and skill development aren’t just ways to stay relevant—they’re the drivers of innovation and opportunity.
Entrepreneurs know that breakthrough ideas often start with a look back. They analyze what worked, what didn’t and why, using those insights to uncover gaps and spark new solutions. Learning from history isn’t about repeating the past. It’s about building on what has come before to create what comes next.
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