Santosh Kumar Mohapatra
Human history is crammed with evidence of what economists call creative destruction, the process of innovation that propels economic growth. The Nobel Prize in Economic Sciences 2025 has been award ed to Joel Mokyr, a professor at Northwestern University in the US; French economist Philippe Aghion of Collège de France, and Peter Howitt of Brown University for explaining how innovation leads to sustained economic growth and the pro cess of “creative destruction”- a concept widely regarded by economists as a central feature of capitalist economies.
According to The Royal Swedish Academy of Sciences, the Prize was split, with half going to Mokyr for explaining the role of technological innovation and the other half to Aghion and Howitt for identifying technology as a crucial driver of long-term economic growth and developing the mathematical model of creative destruction. The word “creative” refers to the new innovations brought to market, and “destruction” to the fate of those antiquated products and processes that are replaced by the new innovation. Creative destruction always produces winners and losers — where new innovations make older ones obsolete. For example, smartphones have displaced landlines and payphones (as well as alarm clocks and cameras). The evolution of trans portation itself, from the use of animals to the invention of the wheel, railways, and finally the aeroplane, has been a long process of inventing newer, more efficient ways of travelling, often dismantling outmoded ones.
In Indian mythology, “creative destruction” refers to the cosmological realm occupied by the King of Dancers, Shiva-Nataraj, whose continuous dance of creation and destruction governs the universe. While German economist and sociologist Werner Sombart introduced the term creative destruction, it was first coined by Austrian economist Joseph Schumpeter in 1942. Sombart first used creative destruction in 1913 to describe how destruction fuels creation, using the example of how wood scarcity forced the invention of substitutes and new heating methods.
Both Karl Marx and Joseph Schumpeter used the idea of “creative destruction” to describe capitalism’s inherent instability, but they differed in their conclusions. In Capitalism, Socialism and Democracy (1942), Schumpeter described the process where new innovations replace outdated systems and technologies. This was in contrast with Marx, who argued that the creative-destructive forces unleashed by capitalism would eventually lead to its ultimate collapse as a system.
Mokyr, Aghion, and Howitt’s work reminds us that real progress includes qualitative improvements, new medicines, safer transport, cleaner energy, better food, and faster communication, all of which enhance human well-being. But it is widely recognised that many countries, including India, have historically prioritised GDP growth as the primary metric of national progress, often without giving equal weight to qualitative improvements in citizens’ lives.
It is important to note here that sustained growth is not synonymous with sustainable growth. Sustained growth that focuses on a consistent increase in metrics like GDP can have significant negative side effects, such as higher pollution, increasing inequality, and the unsustainable use of natural resources. Mokyr believes technology can sometimes help solve these issues, but only when guided by strong,well-designed public policies.
The Nobel laureates’ work shows that we must be aware of and thwart threats to continued growth. These threats may come from a few companies being allowed to dominate the market, restrictions on academic freedom, expanding knowledge at regional rather than global levels, and obstructions from potentially disadvantaged groups. If we fail to respond to these threats, the machine that has given us sustained growth, creative destruction may cease working, and we would once again need to become accustomed to stagnation. Through his research in economic his tory, Mokyr has demonstrated that a continual flow of useful knowledge is necessary.
There is a growing global movement to move beyond a narrow focus on economic output toward a more holistic view of well-being. It is imperative to have sustainable growth that integrates economic viability with environmental protection and social equity.
The writer is an Odisha-based economist and columnist.