On 10 December, the Nobel Foundation will host its prize-giving ceremony in Stockholm. The three recipients of the 2025 prize in economics have each tackled a question first set down by Adam Smith 249 years ago: what are the causes of the wealth of nations? The ongoing relevance of what they have found is critical to unlocking long-run economic growth today.

Half of the prize goes to an economic historian, Professor Joel Mokyr of Northwestern University, whose research has focused on the centuries leading up to the industrial revolution. Until the second half of the sixteenth century, scientific inquiry was largely either stifled or controlled by centralised authorities such as the Church. Around that time, a "Scientific Revolution" emerged that placed knowledge, its accumulation and its communication on a different footing. Mokyr showed how what he terms a "culture of growth" emerged to play a key role in sustaining progress: that culture entailed challenging established thought, verifying theories experimentally, codifying results systematically and then sharing findings freely. The ideals that reached their fullest expression in the Scottish Enlightenment — independence of thought and a tolerance of different ideas — were key to the later emergence of modern growth. In societies that resisted this Scientific Revolution, technological progress was held back.

For Mokyr, those changes in attitudes to scientific progress were necessary but not sufficient for modern growth to emerge. What he calls "useful knowledge", and the feedback loop between understanding why things work conceptually and knowing how to make them work in reality, required skilled practitioners who could translate new theory into practice. Britain's crucial advantage lay in its abundance of mechanical know how: the millwrights, instrument makers, and artisans who could read the designs, debug the prototypes, and make the marginal improvements that turned promising ideas into transformative technologies. Without these improvers, scientific breakthroughs would have remained mere curiosities rather than engines of growth. The integral role that a skilled manual worker class plays in sustaining growth leaves clear lessons for today.

The other half of the prize is awarded to two economists, Professors Philippe Aghion and Peter Howitt, from London School of Economics and Brown University, respectively. They won for helping us understand how modern growth can be sustained not in spite of, but because of the disruptive nature of new technologies. Their theory of "creative destruction" explains how innovation drives growth by replacing what existed before it. New firms enter markets with better products or processes, stealing business from existing firms. This churn — which we observe in the life cycle of companies and in jobs created and destroyed — is, for Aghion and Howitt, not a consequence of growth but its engine. Their framework reveals why growth requires balancing competitive pressure to innovate against institutional protections — like useful patents — that let innovators profit from their investments.

We were taught in school that, at some point in the mid-1700s, along came something called The Industrial Revolution. This episode, so the standard story goes, picked the world up off its roughly stable but poor tracks and set it off to a new destination. A "wave of gadgets" that swept first the UK, then western Europe and its offshoots, joined together with intensifying energy use and rapid urbanisation to make much (though not all) of the world continuously richer — a "Great Enrichment", to use economist and historian Deirdre McCloskey's phrase, in which average income per person (adjusted for inflation) has increased by a factor of 15 since that time.

While the industrial revolution remains a pivotal turning point, the Nobel laureates show us that the story underlying this transformation is more complicated. First, fundamentally important changes happened in the centuries leading up to the industrial revolution; second, growth was sustained precisely through the ongoing process of technological replacement. Taken together, the work of Mokyr, Aghion and Howitt directs us to realise that the fundamental influences making the modern world have not been the new technologies themselves, but the cultural and institutional environment in which those technologies could emerge to replace what went before. Understanding this matters not just for explaining the past, but for navigating today’s technological transformations.

Indeed, these insights carry urgent relevance. The environmental costs of two centuries of growth now threaten our collective future, yet many of the technological changes required to arrest and reverse those consequences — renewable energy, carbon capture, sustainable agriculture — are subject to the same dynamics the laureates have identified. As AI promises to accelerate the science-technology feedback loop Mokyr describes, we must ensure the social and institutional foundations remain sound: openness to new ideas, protection of independent inquiry, and tolerance of dissent and disruption. The potential gains are enormous if AI becomes widely adopted across the economy, even as it severely disrupts what went before.

The real challenge is that we cannot know precisely which jobs, sectors and existing practices will win or lose. We are left with the instinct to protect the status quo. What we do know from the laureates' research, however, is that the process of scientific and technological change is productive precisely because is disruptive. Attempts to control that process can backfire, slowing the very innovations that we need.

But Adam Smith recognised that the wealth of nations are also built on moral foundations — that markets require social sentiments and mutual regard to function. In a modern setting, civil and social institutions can protect people’s rights and dignity even as economic forces reshape their livelihoods. Scotland can actively cultivate both the openness to disruption that drives growth and the institutional protections that safeguard dignity during periods of change, but these are separate objectives.

As we approach the 250th anniversary of the Wealth of Nations in 2026, Smith’s foundational questions endure. This year's laureates remind us that sustained prosperity requires not just innovation, but the cultural and institutional conditions that allow it to flourish. The University of Glasgow and our international partners will mark the 250th anniversary with events examining both Smith's intellectual legacy and our evolving understanding of the wealth of nations.

First published: 16 December 2025

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