Nobel Prize in Economics 2025

The 2025 Nobel Prize in Economics was awarded to Joel Mokyr, Philippe Aghion, and Peter Howitt for their work on innovation-driven economic growth and the theory of creative destruction. The award highlights their contributions to understanding economic development, technological progress, and policy implications.

Key Highlights

Winners and Their Contributions:

•       Joel Mokyr: Identified the conditions necessary for sustained economic growth through technological progress. Using historical data, he established that continuous technological innovation is the foundation of economic development.
•       Philippe Aghion and Peter Howitt: Developed the theory of ‘creative destruction,’ where new technologies and products displace older ones, driving economic expansion. Their mathematical model aids in understanding this process.
•       Prize Distribution: Half of the prize was awarded to Mokyr, with the other half jointly awarded to Aghion and Howitt.

Significance of the Research:

•       Explains the reasons behind global economic growth and improvements in living standards over the past two centuries.
•       Challenges the notion that economic growth is automatic, emphasizing the need for continuous innovation and progress.
•       Highlights policy measures to address economic stagnation.

Policy Implications:

•       For regions like Europe, balancing competition and proactive industrial policies is crucial, drawing inspiration from the U.S. and China.
•       For developing countries like India, the theory underscores the importance of policies promoting startups, research and development (R&D), and technological innovation.
•       India’s initiatives like ‘Atmanirbhar Bharat’ and ‘Make in India’ align with innovation-driven growth.

Notable Indian Recipients:

•       Amartya Sen (1998): Awarded for his work in welfare economics, poverty, and human development. He emphasized that economic growth alone is insufficient, and true development requires a focus on capabilities, rights, and freedoms.
•       Abhijit Banerjee (2019): Jointly awarded with Esther Duflo and Michael Kremer for their experimental approach to alleviating global poverty and pioneering randomized controlled trials (RCTs) to evaluate social and economic policies.

Nobel Prize in Economics:

•       Established in 1968 by Sweden’s Central Bank (Sveriges Riksbank) on its 300th anniversary as the ‘Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.’
•       Administered by the Royal Swedish Academy of Sciences, it follows the same principles as the original Nobel Prizes and carries an equivalent monetary value.

Potential Questions for Mains Examination:

Question 1: Discuss the contributions of the 2025 Nobel Prize winners in Economics and analyze the implications of their theories for promoting innovation-driven economic growth in India. (250 words)

Question 2: How does the theory of ‘creative destruction’ influence economic growth? Discuss its application in addressing economic stagnation in India. (150 words)

Question 3: Highlight the need for a balance between industrial policies and innovation to accelerate economic growth in India. Support your argument with reference to the 2025 Nobel Prize in Economics. (250 words)

Potential Essay Questions:

Question 1: “Innovation and Creative Destruction: The Future of India’s Economic Growth”

Question 2: “The Role of Technological Progress in Addressing Economic Stagnation”

Question 3: “The Need for Innovation-Driven Industrial Policies for India’s Self-Reliance”

Potential Questions for Preliminary Examination:

Question 1: Who was awarded the 2025 Nobel Prize in Economics?

1. A) Joel Mokyr, Philippe Aghion, and Peter Howitt
   B) Amartya Sen, Abhijit Banerjee, and Michael Kremer
   C) Esther Duflo, Joel Mokyr, and Peter Howitt
   D) Philippe Aghion, Michael Kremer, and Esther Duflo

Answer: A) Joel Mokyr, Philippe Aghion, and Peter Howitt

Question 2: The theory of ‘creative destruction,’ associated with the 2025 Nobel Prize in Economics, was developed by:

1. A) Joel Mokyr
   B) Philippe Aghion and Peter Howitt
   C) Amartya Sen
   D) Abhijit Banerjee

Answer: B) Philippe Aghion and Peter Howitt

Question 3: Which of the following theories is associated with the 2025 Nobel Prize in Economics?

1. A) Welfare Economics
   B) Creative Destruction
   C) Randomized Controlled Trials (RCTs)
   D) Human Development Index

Answer: B) Creative Destruction