The 2025 Nobel Prize in Economics was awarded to Joel Mokyr, Philippe Aghion, and Peter Howitt, recognizing their crucial contribution to understanding economic growth driven by innovation.
Their research unpacks how modern societies achieve continuous development through the complex interplay of knowledge, institutions, and incentives — with Intellectual Property (IP) playing an essential role.
Creative Destruction and the Incentive of Intellectual Property
Aghion and Howitt, distinguished for their theory of growth through creative destruction, were inspired by Joseph Schumpeter, who described economic dynamism as a constant process of renewal — where new ideas and firms replace existing ones, driving productivity and overall welfare.
Innovation, therefore, requires an environment that rewards risk-taking and investment in Research and Development (R&D). Intellectual Property fulfills this function by granting innovators exclusive and temporary rights over their creations, allowing them to recover costs and earn a fair return.
Without this specific incentive, imitation would discourage investment, disrupting the cycle of creative destruction — and consequently hindering stable economic growth.
Valuable Knowledge and the Role of Institutions
Joel Mokyr adds a historical perspective to this concept. He observed that the transition toward modern growth during the Industrial Revolution occurred due to the unusual connection between scientific knowledge (“knowing why”) and practical knowledge (“knowing how”).
This interaction made it possible to transform knowledge into technology and productivity. From this standpoint, Intellectual Property laws are crucial: they not only motivate the creation of knowledge but also ensure its eventual dissemination.
When the protection period expires, inventions enter the public domain, enabling new companies and researchers to build upon previous advances — in a continuous process of accumulation and progress.
Implications for Economic Policy and Innovation
The work of these laureates reminds us that growth does not simply arise on its own — it requires appropriate public and institutional policies.
Every system of Intellectual Property regulation faces the challenge of maintaining a delicate balance between two key objectives:
- Fostering innovation (incentive): granting strong protection to stimulate creativity and investment.
- Promoting knowledge diffusion (access): ensuring that ideas eventually flow freely and trigger further innovation.
Achieving this balance is essential for Intellectual Property to remain a true engine of economic growth, as revealed by the research honored in 2025.
