Economic expansion often arises not from stability, but from dynamic change—specifically, the process known as creative destruction. Nobel laureates Philippe Aghion and Peter Howitt have explored how innovation drives long-term growth by replacing outdated systems with more efficient ones. Their research underscores that sustained development depends on allowing old industries to decline while nurturing emerging technologies and business models.
Creative destruction, a concept originally introduced by economist Joseph Schumpeter, describes how entrepreneurial activity disrupts existing markets, leading to productivity gains and economic renewal. Aghion and Howitt expanded this theory by modeling how competition and innovation interact within market economies, showing that progress is not automatic but relies on institutional frameworks that reward risk-taking and invention.
Their work highlights that policies supporting research, education, and access to capital are crucial for enabling innovators to challenge established firms. When new entrants succeed, they create jobs, improve consumer choice, and increase overall efficiency—even as some traditional roles become obsolete.
Importantly, the economists argue that managing the transition is key. While displacement can cause short-term hardship, effective social safety nets and retraining programs help workers adapt. The goal is not to prevent change, but to ensure it benefits society broadly.
This perspective remains highly relevant in today’s rapidly evolving technological landscape, where automation, artificial intelligence, and digital platforms continue to reshape industries.
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Sustained growth through creative destruction: Nobel laureates Philippe Aghion and Peter Howitt CEPR