The 2025 Nobel Prize in Economics has been awarded to Joel Mokyr, Philippe Aghion, and Peter Howitt for their pioneering work on innovation and economic growth. Their research has profoundly transformed how economists understand the engines of prosperity, showing that long-term development depends not only on institutions or capital, but on the power of ideas. Yet among the three laureates, Joel Mokyr deserves special recognition. No mainstream economist has done more than Mokyr to demonstrate that ideas matter in economic growth and that the history of prosperity is, at its core, a history of changing beliefs about progress.
Joel Mokyr: The Historian of Ideas and Growth
Joel Mokyr has spent decades building a bridge between economic history and modern growth theory. In works such as The Enlightened Economy and A Culture of Growth, he has argued that the modern world owes its prosperity to a cultural revolution: the rise of the idea of progress. Mokyr showed that Europe’s willingness to question tradition and experiment with new ideas created a self-reinforcing cycle of innovation. In contrast, imperial China, despite its technological sophistication, remained skeptical of innovation for much longer, constrained by norms that favored harmony and continuity over experimentation.
Mokyr’s insight is that ideas of progress are not abstract ideals but engines of transformation. When a society internalizes the belief that knowledge can and should be advanced, it creates the moral and intellectual framework for sustained economic growth. His theories have been confirmed by empirical research across disciplines, reinforcing the view that belief in progress precedes technological and institutional dynamism.
The Institutions that Matter
Unlike many economists who refer to “institutions” in vague terms, Mokyr has been remarkably specific. He has shown that the institutions that mattered most for industrialization were largely private institutions—apprenticeship systems, banks, professional societies, academies, and networks of craftsmen and thinkers. These organizations nurtured practical knowledge, encouraged intellectual exchange, and linked science to its applications.
This perspective challenges conventional narratives that overemphasize the role of formal state institutions. Mokyr demonstrated that innovation thrives where there is a dense web of voluntary associations and private cooperation, and where curiosity and experimentation are rewarded. Progress, in his view, was built from the ground up by individuals and institutions that believed knowledge could improve the human condition.
Science, Technology, and the Epistemic Base
Another of Mokyr’s major contributions concerns the relationship between science and technology. He has shown that the Industrial Revolution did not simply fade away because Europe had developed an epistemic base for science, a foundation of knowledge that allowed people to study and improve technology systematically. Science, paradoxically, mattered little to the early Industrial Revolution itself, as most inventions preceded scientific explanation. Yet building an epistemic base gave Europe the intellectual tools to understand, refine, and extend those technologies.
In Mokyr’s view, science often lags behind technology. People create tools first and understand them later. However, societies that build a culture of inquiry and knowledge are better positioned to convert inventions into continuous streams of improvement. This insight is crucial for policymakers seeking to foster sustainable innovation rather than transient bursts of productivity.
Human Capital and the Application of Knowledge
Mokyr also makes a clear distinction between education and human capital. Education refers to formal learning, while human capital represents the ability to apply knowledge productively. During the Industrial Revolution, continental Europe may have had more trained engineers and educated workers, but Britain excelled in turning knowledge into practical outcomes. British artisans, mechanics, and tinkerers were skilled at refining inventions and bringing them to market.
Many inventions developed on the continent found commercial success in Britain, the place where technology was most effectively diffused. As Mokyr observed, the nation that perfects and disseminates technology reaps the greatest benefits. This insight has been confirmed by the recent research of Jeffrey Ding, who demonstrated that technological diffusion is a decisive factor in determining which societies capture the gains from innovation.
Two Paths of Prosperity
In his latest book, Two Paths of Prosperity, co-authored with Guido Tabellini, Mokyr extends his framework to a comparative study of economic development. The book shows that Europe’s rise was enabled by the emergence of impersonal institutions that facilitated cooperation beyond kinship networks. China’s growth, by contrast, was constrained by kin-intensive institutions that privileged family and clan ties over merit-based collaboration. These structures limited the scale of business enterprises and slowed the diffusion of new ideas.
The argument has clear relevance for modern policy. Innovation policy must address not only investment and education but also the social foundations of openness. Societies that encourage trust, merit, and impersonal cooperation are more likely to sustain innovation over the long term.
Philippe Aghion and Peter Howitt: Linking Capital and Innovation
Similarly, Philippe Aghion and Peter Howitt are equally impressive thinkers whose ideas have profoundly shaped how we view growth. Their work has enriched our understanding of the link between capital accumulation and innovation. Through their Schumpeterian growth model, they demonstrated that the accumulation of capital does more than expand output; it helps to stimulate innovation by funding research, experimentation, and creative destruction.
Their model captures the dynamic process by which firms invest, compete, and replace one another through technological progress. This framework provides the theoretical foundation for what Mokyr’s historical work illustrates in practice: that innovation is both an economic and a cultural process, sustained by a continual interplay between investment, knowledge, and belief in progress.
Why Policymakers Should Listen
Joel Mokyr’s work transcends academic boundaries. He is more than an economic historian; he is an interpreter of civilization’s most powerful idea—that progress is possible and knowledge can improve the human condition. His insights show that the roots of prosperity lie not merely in markets or machines but in mindsets.
The Enlightenment belief in progress, curiosity, and improvement remains the most enduring engine of development. Mokyr has shown that societies prosper when they value learning, reward experimentation, and dare to question inherited norms. His frameworks offer a guide for policymakers who wish to understand why some nations advance and others stagnate.
By honoring Mokyr, Aghion, and Howitt, the Nobel Committee has recognized that the future of growth depends on innovation, and that innovation begins with an idea. Ideas drive progress, and progress defines civilization. Policymakers should listen.
