Special Report: Nobel Economics Prize Announced, Three Scholars Awarded

Aghion is a leading figure in the field of economic growth theory. Through establishing the Aghion-Howitt model based on "creative destruction," he successfully brought the Schumpeterian economic growth paradigm back into mainstream macroeconomic theory.

On October 13, the Swedish Royal Academy of Sciences awarded the 2025 Nobel Prize in Economics to three economists: Joel Mokyr, Philippe Aghion, and Peter Howitt, in recognition of their work "explaining innovation-driven economic growth."

Half of the prize money was awarded to Mokyr from Northwestern University in the United States, recognizing his "discovery of the prerequisites for sustained growth through technological progress." The other half was jointly awarded to Aghion from the Collège de France and INSEAD, and the London School of Economics (LSE) in the UK, and Howitt from Brown University in the United States, for their "theory of sustained growth through creative destruction."

Among them, Aghion is a leading authority in the field of economic growth theory. Through establishing the Aghion-Howitt model based on "creative destruction," he successfully brought the Schumpeterian economic growth paradigm back into mainstream macroeconomic theory, and has long been a strong candidate for the Nobel Prize in Economics.

In August 2021, Aghion gave an exclusive interview and answered questions about economic growth and stimulus policies.

The following are selected excerpts from that interview.

Q: Creative destruction theory is the viewpoint of economist Schumpeter, which simply means that each large-scale innovation eliminates old technologies and production systems while establishing new production systems. During the 2021 pandemic, new industries continuously emerged while old industries declined. How should policymakers in various countries respond?

Aghion: It is very important for governments to help employees and businesses readapt to the new economic environment. I think the state should play an important role in educating and training (people), providing appropriate income insurance, and reallocating people to new economic activities. This is where "creative destruction" comes into play.

In Chapter 11 of my new book "The Power of Creative Destruction," I talked a lot about the "Danish model." When a person loses their job in Denmark, they can receive nearly 90% of their salary for two years. At the same time, the state must retrain this person so they can find new work.

This is why when someone loses their job in Denmark, they don't feel pressure and their health isn't too affected. Conversely, in the United States, many people die due to job loss because they don't have a good mechanism to handle this destruction.

You have to see that the United States has strong innovation capabilities and excellent innovation mechanisms, but it's not good at providing protection (to people). Denmark does well in social protection, which is the so-called "Scandinavian model." I think we can combine America's innovation ecosystem with Scandinavian-style state protection systems. This is my dream paradigm, and I think we can have it.

Q: How do you evaluate the United States' economic measures in responding to the pandemic?

Aghion: After the Biden administration came to power, they are trying their best to make up for it. For example, the Biden administration launched a series of government relief measures. The problem is, you know, it's difficult to change anything in the United States.

The Biden administration provided a package of relief solutions, trying to provide relief for American families. Nevertheless, this is not enough: there is no "Danish model" in the United States. They need to rethink the social system because they don't have a good social security system to guard against unemployment risk, pandemic risk, or financial crisis risk. Ordinary American individuals and families don't have good protection.

Q: But in the United States, the mainstream view has long been critical of the welfare state concept.

Aghion: I think change might happen now, sometimes ideas evolve: they don't want to be told (what to do), they don't want to be forced to do things, but they want choices. Especially after the pandemic outbreak, I think they have changed, so this creates opportunities. You can see that the United States already has many social security measures that didn't exist before, and they are very popular.

Q: There are many e-commerce giants in the world now, but Europe seems to lack industry leaders in the information and communication technology (ICT) field?

Aghion: Yes, Europe is under-investing in innovation. European countries now really need to unite to promote major projects; Europe needs its own projects. At the same time, Europe has too many measures to ensure anti-competition, and also needs to ensure that investment budget deficits are not too large. This makes it a European police force rather than a European investor. We now need a Europe that will invest, which would be a good thing. The crisis has also proven this: Europe is not efficient in innovation. In the past, European industry was very developed, but now it is much less industrialized and much less innovative.