Why the study of growth is always a study of renewal

Yet, a pattern runs through these shifting emphasis. The Nobel keeps returning to one theme that economics cannot leave behind – growth. But what does growth exactly mean – is it something that can only be measured in numbers, is it a story of renewal, or is it about knowledge and innovation?

Growth as a story of renewal

Growth cannot be measured only in numbers or output. It is a story of renewal – of how societies reorganise themselves, how ideas travel across the globe, and how people imagine their future differently. 

The 2025 Nobel Prize in Economics has been awarded to Joel Mokyr, Philippe Aghion, and Peter Howitt for explaining how technological innovation drives sustained growth. The three laureates join a long queue of thinkers, stretching back to the mid-20th century, who tried to explain how economies change through knowledge and invention. 

Their work carries forward an older idea about the conditions under which human creativity becomes economic transformation, what economist Joseph Schumpeter described as creative destruction.

Progress carries loss within it

In 1942, Schumpeter described capitalism as a system that survives through its own undoing. Every innovation, he wrote, replaces what came before; every new enterprise stands on the remains of the old. He called this process creative destruction. For Schumpeter, it was not a defect of capitalism but its pulse, the cost of renewal and the sign of vitality. 

He sensed something deep about modern economies: that progress carries loss within it. Yet his insight was more lyrical than structured. He could feel the rhythm of capitalism, but he did not have the tools to capture it in a form that others could test or extend. The task of turning his intuition into a science would fall on those who came after him. 

1. 01

   What is Kuznets Curve in economics?

   Simon Kuznets, who gave economics its eyes, proposed this curve to demonstrate the hypothesis that economic growth initially leads to greater inequality and narrows later.

2. 02

   Without technological progress, why do economies run into limits?

   Robert Solow explains that capital and labour alone cannot sustain growth, and that without technological progress, economies run into limits.

3. 03

   What is creative destruction?

   Given by economist Joseph Schumpeter, creative destruction refers to the process of innovation that drives economic growth. For instance, sustained economic growth occurs when new technologies replace old ones as part of the development process.

Schumpeter’s storm of innovation becomes measurable  

The first of them was Paul Samuelson. His Nobel Prize in 1970 recognised not one theory, but a transformation in the way economists could think. He showed that economic life could be expressed in the language of mathematics without losing its movement through time.

In his book, Foundations of Economic Analysis (1947), Samuelson built the scaffolding that would later support modern growth theory. His methods of comparative statics and dynamic reasoning made it possible to study how economies evolve, adjust, and sometimes break.

Samuelson himself did not write about creative destruction. Yet the tools he built gave others a way to see it, to trace Schumpeter’s storm not only in history or metaphor, but in the structure of equations, policy responses, and institutional change. Without Samuelson, that storm would have remained a powerful image. With him, it became measurable.

Then came Kuznets Curve 

A year later came Simon Kuznets, who gave economics its eyes. He built the framework for national income accounting, enabling nations to measure what until then had been invisible: the rhythm of production, capital, and distribution.

He observed the curve that now bears his name Kuznets Curve, where inequality often widens in the early stages of growth and narrows later, though not as a law of nature. This observation was not born of theory but from data, interpreted with care and doubt. 

Kuznets was an empiricist who never forgot the people behind the numbers. He asked questions that remain unresolved: What does growth feel like to those who live through it? Who gains, and who is left behind? In doing so, he turned abstraction into record, showing that the economy is not a machine but a story told in human terms.

How individual choice shapes economic balance 

In 1972, Kenneth Arrow and John Hicks shared the Nobel Prize in Economics for giving coherence to this expanding discipline. Their work on general equilibrium and welfare theory explained how individual decisions can produce collective order or fail to do so when information is unequal, markets are incomplete, or cooperation breaks down. 

Hicks’s IS–LM model connected money and production, showing how the economy breathes through policy and demand. They supplied the grammar of interaction. Later models of growth would rely on their logic of interdependence, even when studying change over decades.

Technological progress, key to continued growth 

With Robert Solow came a decisive turn. His 1987 Nobel Prize recognised the Solow-Swan model, which demonstrated that capital and labour alone cannot sustain growth. Without technological progress, economies run into limits. 

In Solow’s equations, technology was an external force, something that arrived from outside human control. Yet by revealing this missing piece, he invited others to look for its source. Growth was no longer destiny; it was a process that needed explanation.

When ideas became the new capital 

Paul Romer, awarded the Nobel Prize in 2018, opened the door Solow had left closed. In his theory of endogenous growth, ideas became the new capital. In his view, innovation is continuous process of an individual’s choice, not luck, which is shaped by research, education, and incentives. 

Romer’s model brought creativity into policy. He argued, economies can renew themselves indefinitely if knowledge spreads and multiplies; they should invest in minds rather than machines. It was a return to Schumpeter’s insight, now written in the language of modern economics.

Growth is cultural before it becomes economic 

Mokyr carried the discussion back to history. His research on the Industrial Revolution showed that technological change emerges from a society’s values as much as its markets. Where learning and curiosity are encouraged, innovation takes root; where fear or hierarchy stifle inquiry, progress fades. 

Mokyr reminded economists that growth is cultural before it becomes economic. To sustain innovation, societies must believe that knowledge is worth pursuing, and that the future can be better than the past.

Growth is also a constant renewal 

Aghion and Howitt gave mathematical form to Schumpeter’s creative destruction. In their model, each new technology replaces an older one. Firms race to innovate, earn temporary rewards, and are then replaced by others who do the same. 

Their work revealed that growth is not a steady accumulation but a constant renewal. Innovation brings prosperity and disruption in the same breath. The system survives by changing, just as Schumpeter had described in prose more than eighty years earlier.

Redefining progress   

This year’s Nobel Prize in Economics again highlights the significance of innovation-driven economic growth. The concept of growth, which is an ongoing process, has evolved over time. It is shaped by factors like changing economic conditions, developments in technology, policy, etc.

As new challenges emerge, existing growth models are often reassessed. Innovation can generate wealth, but it can also disrupt existing structures. Similarly, competition can drive discovery, but it can also deepen inequality. These tensions shape how economies move forward.

In the contemporary time, many new questions have emerged. The advanced innovations in automation and artificial intelligence are re-drawing the boundaries for work. The digital economy has become the latest idea of creative destruction, which transforms the way we produce, learn, and interact. The forces remain the same that once raised productivity and now challenge inclusion and sustainability.

Post read questions

Growth is not a steady accumulation but a constant renewal. Elucidate. 

Capital and labour alone cannot sustain growth. Without technological progress, economies run into limits. Illustrate. 

How do forces like automation and artificial intelligence reshape the meaning of growth today?

What is creative destruction? Do you think the digital economy represents a new form of creative destruction?

(Pushpendra Singh is an Assistant Professor of Economics at Somaiya Vidyavihar University, Mumbai, and Archana Singh is an Assistant Professor of Gender and Economics at the International Institute for Population Sciences, Mumbai.)

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