“It’s the innovation, stupid.” (paraphrasing James Carville, with apologies).
In the 1990’s James Carville continuously and famously advised Bill Clinton to focus on the economy in his campaigns and while in office (with only partial success.)
Fact is, innovation and the economy are closely tied. This week’s reminder? Monday morning the world awoke to the news that Joel Mokyr was awarded a share in the 2025 Nobel Memorial Prize in Economic Sciences. According to Eshe Nelson, writing for the New York Times:
The Nobel Memorial Prize in Economic Sciences was awarded on Monday to Joel Mokyr at Northwestern University, Philippe Aghion at INSEAD and the London School of Economics and Peter Howitt of Brown University for their work on innovation-driven economic growth.
The three economists were awarded for showing how technological progress had led to sustained economic growth, which leads to a better standard of living, health and quality of life.
Mr. Mokyr was awarded the half of the prize “for having identified the prerequisites for sustained growth through technological progress,” the committee said.
Mr. Aghion and Mr. Howitt shared the other half of the award for what the committee described as “the theory of sustained growth through creative destruction.”
The article quoted a committee member:
The laureates’ work shows that “we should not take progress for granted,” Kerstin Enflo, a member of the Nobel committee, said during a news conference.
“Instead, society must keep an eye on the factors that generate and sustain economic growth,” she added. “These are science based, [sic?] innovation, creative destruction and a society open for change.”
Congratulations all around! And well said! Let’s take a closer look at these three pillars of economic growth.
Science-based innovation. Politicians and business leaders of every stripe have long understood that science and innovation are the keys to prosperity. America is Exhibit A. At the moment, America’s four percent of the world’s population accounts for a third of global GDP. Talk about punching above our weight!
Creative destruction. There’s creative destruction and then there’s plain-vanilla destruction.
Creative destruction (German: schöpferische Zerstörung) is a concept in economics that describes a process in which new innovations replace and make obsolete older innovations. The concept is usually identified with the economist Joseph Schumpeter.
In short, innovation must replace what it’s made obsolete instead of merely running alongside of it; otherwise it doesn’t pay off. Suppose that today American factories were still churning out tens of millions of buggy whips annually, that Americans all had a two-horse stable next to their two-car garage, and a carriage-house alongside that, situated on the two acres of grazing-land for the horses. Imagine separate carriage-lanes adjacent to the bike lanes on streets and roads, and livery stables downtown adjacent to the parking garages.
Less a vision of progress than dystopian nightmare.
Simple, unadorned destruction – the action or process of causing so much damage to something that it no longer exists or cannot be repaired – is no better.
(Chasing a rabbit: I used Google search to get the above definition of destruction. Just what I needed for this day’s post. Then I was guilty of overreach. I tried going back to the source, which Google gave as the Oxford English dictionary, only to find this entry:
What does the noun destruction mean?
There are seven meanings listed in OED’s entry for the noun destruction, one of which is labelled obsolete. See ‘Meaning & use’ for definitions, usage, and quotation evidence.
Entry status
OED is undergoing a continuous programme of revision to modernize and improve definitions. This entry has not yet been fully revised.
Apparently, the OED is undergoing continuing creative destruction of its own.)
Which brings us to the Nobel Committee’s last point:
A society open for change. Until a few years ago, the United States not only led the world in innovation (and therefore the prospects of future wealth) but also showed signs of widening the gap. American universities and corporations were accomplishing the research; developing and commercializing the new technologies. They were poised to maintain and extend leadership in harnessing artificial intelligence to the whole of the innovation agenda. The federal government was providing needed seed funding and formulating policies to foster this work. The success was unique, and so visible globally that students and early career professionals from every discipline and from all over the world were clamoring to immigrate here and join in (coincidentally, refreshing and bringing youthful vigor to America’s aging demographic).
The entire enterprise was humming. Today, however, the people of the United States are taking steps in the other direction. Even as the global race to advance artificial intelligence and its applications demands massive additional amounts of electrical power, the government is making policy decisions to reduce investment in renewable energy infrastructure. We’re slowing the rate at which we are bringing cheap, renewable solar power and wind power online just as the rest of the world (aka the economic competition) is ramping these up. We’re attempting to increase our extraction and export of fossil fuels (akin to shipping oats abroad to satisfy a non-existent need for non-existent foreign horses), just as our foreign customers are cutting back their usage. We’ve disrupted the flow of R&D funding to universities and corporations, dangling partial restoration of these funds, but only contingent on political realignment, and with no date for restart or guarantee that funding will be dependable. We’re turning our back on vaccinations and other means of preventive, affordable healthcare the American people need. Our public education, instead of equipping the coming generation of American professionals with the analytical-thinking and tools they need to contribute to a better world future, are attempting to turn back the page of education (not just to the past, but to an impoverished, distilled vision of that past). The bottom line? A slowdown in innovation, inviting the rest of the world to catch up and consign us to the second-rate world status our puny fraction of the world population will justify. In particular, we’re encouraging the world’s best AI minds to align their aspirations, their residences, and their allegiances with other countries elsewhere.
Bottom line? The desired order of things has been reversed. No longer is innovation leading creative destruction. Instead, pure-and-simple destruction has made innovation imperative.
The good news? The current American lead in innovation, though stalled, is so large that it can’t be erased overnight. And necessity remains the mother of invention. Awareness of the need is growing among the general population. Some of the research and application that had been cut short will be restarted. Some will be redirected, tweaked (and appropriately so – there’s always been room for improvement). Truly new innovation will continue to spring forth worldwide and in the United States – though at a slower rate domestically, diminished by the smaller source population, and the aging of that population. There’s time and incentive for Americans to get our collective second wind.
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A bittersweet postscript. I failed to take any real advantage of my year of freshman-level economics at Swarthmore. As a result what little economics I have at my command is fragmented and fragile. But over my career I have received help from several economists. Can’t adequately thank them all (and apologies to those omitted here) but three stand out. In alphabetical order, they are: Heywood Fleisig, Jeff Lazo, and Molly Macauley. It was Molly who introduced me to some of Joel Mokyr’s work a decade or more ago: The Lever of Riches (1992) and The Gifts of Athena (2002). Shortly thereafter I invited Professor Mokyr to meet with the AMS Summer Policy Colloquium, but we couldn’t make the arrangements work. An opportunity missed.
