WASHINGTON (dpa-AFX) - American-Israeli economic historian Joel Mokyr, French economist Philippe Aghion, and Canadian economist Peter Howitt have won the Nobel Prize in economics.
Announcing the award Monday, the Royal Swedish Academy of Sciences said one half of the prize money will go to Joel Mokyr 'for having identified the prerequisites for sustained growth through technological progress' while the other half will go jointly to Philippe Aghion and Peter Howitt 'for the theory of sustained growth through creative destruction'.
'Over the last two centuries, for the first time in history, the world has seen sustained economic growth. This has lifted vast numbers of people out of poverty and laid the foundation of our prosperity. This year's laureates in economic sciences, Joel Mokyr, Philippe Aghion and Peter Howitt, explain how innovation provides the impetus for further progress,' the Swedish Academy said.
Technology advances rapidly and affects us all, with new products and production methods replacing old ones in a never-ending cycle. This is the basis for sustained economic growth, which results in a better standard of living, health and quality of life for people around the globe.
However, this was not always the case. Quite the opposite - stagnation was the norm throughout most of human history. Despite important discoveries now and again, which sometimes led to improved living conditions and higher incomes, growth always eventually leveled off.
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 emphasized 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.
'The laureates' work shows that economic growth cannot be taken for granted. We must uphold the mechanisms that underly creative destruction, so that we do not fall back into stagnation,' says John Hassler, Chair of the Committee for the prize in economic sciences.
Peter Wilkinson Howitt is the Professor of Social Sciences at Brown University.
Dutch-born Joel Mokyr is a Professor at Northwestern University and Professorial Fellow at the Eitan Berglas School of Economics at Tel Aviv University.
Philippe Mario Aghion is a professor at the London School of Economics and at the Paris School of Economics.
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