More or Less: Behind the Stats

Episode: Nobel economics prize 2025: What's the big idea?

Date: October 18, 2025
Host: Tim Harford; Guest Host: Lizzie McNeil

Episode Overview

This episode explores the winners of the 2025 Nobel Memorial Prize in Economic Sciences—Joel Mokyr, Philippe Aghion, and Peter Howitt—focusing on their groundbreaking work explaining "innovation-driven economic growth." Using clear analogies and real-world examples, Tim Harford and Lizzie McNeil break down why economic growth happens, how innovation plays a central role, and why understanding these mechanisms matters to us all.

Key Discussion Points & Insights

1. What Does "Innovation-Driven Economic Growth" Mean?

• Tim Harford explains (02:18): Economic growth isn’t just about having more people; it’s about people enjoying a higher standard of living—“more money, better medicine, bigger houses, better transport, but just better everything.”
• The classic models (like Bob Solow’s) emphasized accumulating capital (roads, factories, tools), but science and technology’s true roles were left vague.

Notable Quote

"In fact, one Nobel laureate in economics once said, once you start thinking about economic growth, it's hard to think about anything else."
— Tim Harford [02:31]

2. The Recipients: Who Are They? (03:47)

• Joel Mokyr: Economic historian, originally from the Netherlands
• Philippe Aghion: French economic theorist
• Peter Howitt: Canadian economic theorist

Distinction:

• Mokyr brings historical perspective on growth patterns.
• Aghion and Howitt created influential mathematical models of growth.

3. The History Behind Growth: Why Did Innovation Suddenly Ignite?

• Lizzie’s question: Our era of ongoing growth is surprisingly recent; why didn’t earlier innovations cause it?
• Tim’s answer (04:22):
  • Innovations existed for centuries—printing press, the heavy plough, windmills—but didn’t spark sustained prosperity.
  • Between 1200 and 1700 in the UK, income per person scarcely rose; growth was only in population.
  • Mokyr’s insight: The breakthrough came with the “self-reinforcing process” during/preceding the Industrial Revolution. Scientists and engineers started to collaborate more closely, blending theoretical advances (propositional knowledge) with practical know-how (prescriptive knowledge).

Notable Quote

"It’s not until the Industrial Revolution... that you get this interplay between scientists... developing new theories and... practical people developing new things. And that process really takes."
— Tim Harford [05:19]

4. Creative Destruction and Economic Models

• Lizzie introduces “creative destruction,” which Tim calls "quite punk" (06:14).
• Tim explains (06:22):
  • The idea (popularized by Joseph Schumpeter) is that new ideas destroy the old—“each time you come up with a new idea, you’re destroying the old.”
  • This process drives productivity and growth, but also causes disruption—workers in obsolete sectors must adapt.
  • Societies need to foster a culture that embraces this cycle for progress to continue.
• Aghion and Howitt’s Contribution:
  • They translated these ideas into mathematical models (published in 1992), linking economic growth directly to research, innovation, and incentives.
  • Their model accounts for both household savings (funding research) and firm behavior (the race for patents and market dominance).
  • These models are foundational in macroeconomics today and shaped how economists understand growth dynamics.

Memorable Moment

"There’s this sort of ladder of top dog firms and they're making the most money. But then all the other firms... are also trying to invest and get their own patent..."
— Tim Harford [07:46]

5. Has the Model Stood Up?

• Lizzie asks (08:45): Has the Aghion-Howitt model been proven?
• Tim responds (08:53):
  • “Proof in economics is a funny thing.” The model is influential, widely used, and has stood the test of time.
  • By the mid-90s, their approach was already part of the mainstream in academic economics.
  • No model fully predicts the real world, but their framework is invaluable to economists.

Notable Quote

"Whether a few equations are ever really going to tell you how the real world itself is going to advance... I don’t think that's something these economists would ever promise."
— Tim Harford [09:32]

Notable Quotes with Timestamps

• "Economic growth is the process by which we get richer... higher standard of living. More money, better medicine, bigger houses, better transport, but just better everything." — Tim Harford [02:18]
• "You create a new idea and it's going to destroy what came before it." — Tim Harford [06:27]
• "Economists think that sort of thing is tremendously clever." — Tim Harford [08:27]
• “It was already influential then. So in that respect it stood the test of time.” — Tim Harford [09:13]

Important Timestamps

• [01:52] Introductions; overview of the Nobel prize subject
• [02:18] Economic growth explained in simple terms
• [04:08] The emergence of sustained economic growth and Mokyr’s theory
• [06:14] “Creative destruction” and Schumpeter’s influence
• [07:50] Structure and significance of the Aghion-Howitt model
• [08:53] Discussion of model influence and “proof” in economics

Summary

This episode brings clarity and context to the Nobel economics prize of 2025, spotlighting how innovation, historical shifts, and sophisticated modeling help us understand why economies grow—and why it matters. Tim Harford’s accessible explanations and historical analogies make the mathematical and theoretical work of Mokyr, Aghion, and Howitt both tangible and relevant, illustrating how their research continues to shape economic thinking today.

If you're curious about why some societies get richer, how new technologies disrupt economies, or how economists try to capture these realities in their models, this is an essential listen.