Joel Mokyr, Philippe Aghion, and Peter Howitt won the 2025 Sveriges Riksbank Prize in Economic Science (Nobel Prize in Economics). We focus on Mokyr’s talk, “The Past and Future of Innovation: Can Progress be sustained?” Mokyr won “for having identified the prerequisites for sustained growth through technological progress”. 

Mokyr points out that in introductory economics classes, we introduce the topic of diminishing returns. Diminishing returns means that as you use more and more of an input, the increase in output increases at a smaller and smaller rate. Likewise, the gains from the invention of a new technology are subject to diminishing returns. Long-term economic growth, therefore, depends on constantly discovering and implementing new technologies.  

Since the 1750s, when the Industrial Revolution began, many people have thought there are only so many ideas to exploit. Once you discover and implement indoor plumbing, there are only so many ways to improve it, and the rate of improvement diminishes, limiting growth potential. However, Mokyr is very optimistic about technological innovation, arguing “you ain’t seen nothing yet, and the best is still to come.” However, he admits that he could be wrong.  

He notes that new tools and instruments lead to new scientific advances. For example, the development and improvement of microscopes were crucial for advancing medical knowledge by enabling clear visualization of cells, tissue structure, and bacteria, and, in turn, developing new theories, such as the germ theory of disease. Today, we have vastly better and newer tools, such as microscopes, telescopes, computers, and lasers.   

He asked, “What can go wrong?” Innovation depends on institutions, and he identifies four crucial conditions for innovation. First, incentives for inventors and innovators to invent without being threatened for challenging conventional wisdom or for being eccentric or contrarian. Second, an open and free market for ideas where no entity has too much market power. Third, creative and innovative thinkers can move wherever they choose and be most productive. All three Nobel Prize winners this year were born outside the US and did most of their work in the US. Fourth, a government that is not too controlling or too absent. Like Goldilocks, some regulation but not too much.  

He notes that our national debt or aging population are not our most serious risks, but rather our increasingly fragmented world, people’s fear of immigration, and anti-intellectualism toward new ideas. He ended by quoting Friedrich Schiller, “Against stupidity, the gods themselves contend in vain.”