A Nobel Prize for explaining when technology leads to growth: NPR

If you graph the history of economic growth, it looks a lot like a hockey stick lying on the ground with its blade raised. In other words, economic growth was fairly stable for millennia, and then, around 1800, it was pointing skyward.

It’s no secret that this inflection point – where the stick’s handle and blade meet – was the Industrial Revolution. It was a crucial turning point in human history, when we left economic stagnation behind and began to see monumental improvements in the economy and our standard of living.

But why around 1800? Why did economic growth continue to increase after this point? And why was Britain the first society to experience this revolutionary change?

Economic historian Joel Mokyr, a professor at Northwestern University and Tel Aviv University, was awarded the 2025 Nobel Prize in Economics this week for his decades of research aimed at answering these questions. (Economists Philippe Aghion and Peter Howitt share the other half of the 2025 prize “for the theory of sustainable growth through creative destruction.”)

For Mokyr, one of the crucial reasons why Britain became the epicenter of the Industrial Revolution in 1800 had to do with science and technology. It is true that many societies before Britain had experienced scientific breakthroughs and technological advances. And sometimes, Mokyr notes, this has led to some economic growth. However, before, no society has seen its economy catapulted into a kind of sustained escape velocity to escape stagnation.

Mokyr centers his explanation on why Britain was different by highlighting how it embraced science, technology and disruptive change. It places much emphasis on the role of the Enlightenment, or intellectual awakening in science, philosophy, politics, and other areas, which swept Europe in and around the 18th century. It was a movement that revolutionized intellectual and political life and helped accelerate technological progress.

But this still doesn’t explain why it was Britain specifically that became the epicenter of the industrial revolution. Other European nations, notably France, also experienced the Age of Enlightenment.

Mokyr’s research suggests that Britain was different because, essentially, the British operationalized the Enlightenment in the real economy more than other countries. It’s not just that scientists, philosophers, and other thinkers have made great intellectual breakthroughs. In Britain, these scientific discoveries and a new way of thinking trickled down to a skilled class of mechanics, contractors, and other “finishers and tinkerers” who put the new ideas into practice in the economy. In this way, “macro-inventions” – or big, paradigm-shifting scientific discoveries – fueled a host of practical “micro-inventions” that practitioners used to gradually reshape society’s economic machine, boosting productivity and propelling economic growth to the moon.

So yes, science and technology are extremely important for economic growth. But the crucial element, according to Mokyr, was that there was also a skilled population of workers and entrepreneurs willing and able to actually put these advances into practice in the economy. Mokyr also points out that Britain’s political institutions – particularly its Parliament – ​​were more open to the disruptive changes (or “creative destruction”) brought about by these new technologies, which often challenged the power and prosperity of entrenched interest groups.

And this is where this year’s fellow Nobel laureates, Philippe Aghion and Peter Howitt, help to further color the picture. They place creative destruction at the center of their popular mathematical model of economic growth.

Creative destruction is an idea associated with the late Austrian economist Joseph Schumpeter. It refers to the healthy process by which new technologies, products and companies replace obsolete technologies in a market economy. This process of change leads to the decline or even disappearance of older businesses and, often, workers losing their jobs. So yes, there are losers in this process and, throughout history, elites and interest groups have sought to block creative destruction. But economists, including Aghion and Howitt, believe it is a crucial process for economic growth.

That’s a lot to think about as the world grapples with the rise of a new wave of disruptive technologies, including artificial intelligence. But the work of Nobel laureates suggests that accepting this technological disruption – and finding ways to operationalize these big advances in the real economy – will be crucial if the blade of the hockey stick continues to push upward.

Anyway, we are happy to announce that Joel Mokyr has been a guest on Planet Money Before. Discover our episodes: When the Luddites attack and Imagining a world without oil. Mokyr also inspired a fictional audio drama we once made, a long time ago called “The Last Job”.

And if this history of ideas type story is the kind of reading you enjoy, may I encourage you to click here to pre-order the Planet Money book. There is a whole chapter on the causes of economic progress and the role of technology, among other things. This goes in more depth than we have room for here. It also contains fun visuals. Planetmoneybook.com. Talk to a friend.