What is Creative Destruction ? (Clue : Nobel Prize in Economic Sciences, 2025)

 Question: What is Creative Destruction ? 

Ans : Growth arises through creative destruction. This process involves innovation, destruction of old products which became obsolete and lose their commercial value. 

According to Nobel laureates, growth means not only GDP but also New medicines, safer cars, better food, more efficient ways of heating and lighting our homes, the internet and increased opportunities for communication with other people over greater distances – these are just a few of the things included in growth. 

Normally , Economists measure economic growth by calculating increases in gross domestic product (GDP) but, actually, it involves much more than just money.

These Economists look at economic growth in Britain and Sweden from the start of the 19th century to the present day, and they see something entirely different. Apart from easily identifiable episodes such as the Great Depression in the 1930s and other crises, growth – rather than stagnation – has become the new normal. A similar pattern, with sustained annual growth of almost two per cent, arose in many industrialised nations after the early 19th century. It may not sound like much, but sustained growth at that level means a doubling of income over a person’s working life. Eventually, this has a revolutionary effect on the world and on people’s quality of life. 

These Nobel laureates have taught us that:- 

1) sustained growth cannot be taken for granted. 

2) Economic stagnation, not growth, has been the norm for most of human history. 

3)Their work shows that we must be aware of, and counteract, 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 blockades from potentially disadvantaged groups. 4)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. We can avoid this if we heed the laureates’ vital insights. 

Mokyr’s, Aghion’s and Howitt’s research helps us to understand contemporary trends and how we can deal with important problems:- 

1)For example, Mokyr’s work shows that AI could reinforce the feedback between propositional and prescriptive knowledge, and increase the rate at which useful knowledge is accumulated. 

2)It is apparent that, in the long run, sustained growth does not only have positive consequences for human wellbeing. First, sustained growth is not synonymous with sustainable growth. Innovations can have significant negative side effects. Mokyr argues that such negative effects sometimes initiate processes that uncover solutions to problems, making technological development a self-correcting process.

3)Clearly, however, this often requires well-designed policies, such as in the areas of climate change, pollution, antibiotic resistance, increasing inequality and the unsustainable use of natural resources. 

Investment in Research and Development : 

According to the Nobel Laureates, the first mechanism is based upon companies that invest in R&D understanding that their current profits from an innovation will not continue forever. Sooner or later, another company will launch a better product. From the perspective of society, however, the value of the old innovation does not disappear, because the new one builds upon the old knowledge. Outcompeted innovations thus have a greater value for society than for the companies that develop them, which makes the private incentives for R&D smaller than the gains to society as a whole. Society can therefore benefit from subsidising R&D. 

What is ‘business stealing’ ? 

Ans : When one company succeeds in pushing another from the top of the ladder, the new company makes a profit while the old company’s profit disappears. The latter is often called “business stealing”, although it is of course not stealing in the legal sense. Therefore, even if the new innovation is only slightly better than the old one, profits may be significant and larger than the socioeconomic gains. Therefore, from a socioeconomic perspective, investments in R&D can be too large; technological development can be too rapid and growth too high. This creates arguments against society subsidising R&D. 

Question : What is the Sveriges Riksbank Prize in Economic Sciences amount ? 

Ans : Full Nobel Prize amount : 11 million SEK 

Question : Why Sveriges Riksbanks Prize in Economic Sciences in 2025 is given to Joel Mokyr and Philippe Aghion and Peter Howitt ? Ans : The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2025 was awarded "for having explained innovation-driven economic growth" with one half to Joel Mokyr "for having identified the prerequisites for sustained growth through technological progress" and the other half jointly to Philippe Aghion and Peter Howitt "for the theory of sustained growth through creative destruction" 

Question: When Sveriges Riksbank established the Sveriges Riksbank Prize in Economic Sciences in memory of Alfred Nobel ? Ans : In 1968, the Sveriges Riksbank established the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. The Royal Swedish Academy of Sciences was given the task to select the economic sciences laureates starting in 1969. 

4)Who selects Nobel laureates for Sveriges Riksbank Prize in Economic Sciences in memory of Alfred Nobel ? 

Ans : Royal Swedish Academy of Sciences 

Question: Who selects Nobel Laureates ? 

Ans : 

A)In his last will and testament, Alfred Nobel specifically designated the institutions responsible for the prizes he wished to be established:- 

i) The Royal Swedish Academy of Sciences for the Nobel Prize in Physics and Chemistry,

ii)Karolinska Institutet for the Nobel Prize in Physiology or Medicine, iii)the Swedish Academy for the Nobel Prize in Literature, and iv)a Committee of five persons to be elected by the Norwegian Parliament (Storting) for the Nobel Peace Prize. 

B) Nobel Prize in Economic Sciences laureates are being selected by : Royal Swedish Academy of Sciences