Jianli Yang, and Jamie Daves
The winners of the 2025 Nobel Prize in Economics underscore how innovation and openness fuel progress—offering lessons for the US–China AI race and the fragility of growth.
The 2025 Nobel Memorial Prize in Economic Sciences, awarded to Joel Mokyr, Philippe Aghion, and Peter Howitt, could not be more timely. Their research explains how innovation, openness, and “creative destruction” sustain long-term growth—an insight that speaks directly to the world’s defining competition between the United States and China over artificial intelligence (AI). As AI reshapes the global economy, the laureates’ theories offer both a roadmap and a warning: societies that embrace openness and manage disruption can prosper, while those that suppress experimentation or isolate themselves risk stagnation.
For most of human history, stagnation was normal. Mokyr showed that sustained growth began only when invention was joined with scientific understanding—when people learned not only that something worked, but why. In his seminal work A Culture of Growth, Mokyr traced this transformation to Europe’s Enlightenment: a culture open to debate, curiosity, and dissent. Aghion and Howitt, working from the legacy of Joseph Schumpeter, developed the modern theory of endogenous growth. Their model of creative destruction explained how new technologies continuously replace the old—an engine of renewal that generates both prosperity and disruption. Together, these economists redefined progress not as a steady climb, but as a perpetual cycle of creation and reinvention.
America’s Market-Driven Model—and Its Emerging Weaknesses
The United States remains the closest embodiment of this dynamic system. Its AI ecosystem thrives on entrepreneurial competition, venture capital, and academic-industry collaboration. Firms such as OpenAI, Anthropic, and NVIDIA exemplify creative destruction in action: each breakthrough model or chip generation makes the previous one obsolete, pushing the technological frontier forward. This self-sustaining churn is what Aghion and Howitt called endogenous growth, innovation arising from within through market incentives and intellectual freedom.
Yet creative destruction comes with costs. Every wave of innovation displaces workers, bankrupts firms, and provokes social resistance. Aghion has long emphasized that for innovation to remain politically sustainable, societies must cushion disruption through education, mobility, and social insurance, not through protectionism. America’s challenge is precisely here. Its AI revolution is unfolding amid widening inequality, eroding trust in institutions, and a polarized political climate that threatens long-term investment in research and education.
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