he 2025 Nobel Prize in Economic Sciences has been awarded to Joel Mokyr, Philippe Aghion and Peter Howitt for their pioneering work explaining how innovation fuels long-term economic growth. Their research helps us understand why, for the first time in human history, the world has seen continuous prosperity for nearly two centuries. The properity is driven by technological progress and the constant renewal of ideas.

The three economists have shown that innovation is the key engine of modern economies. Joel Mokyr revealed that societies that embrace science and openness to new ideas create the conditions for lasting progress. Philippe Aghion and Peter Howitt developed the influential “creative destruction” theory, explaining how new technologies replace old ones—sometimes painfully, but ultimately making economies more dynamic and productive. Together, their work sheds light on how progress is sustained and why protecting the forces that drive innovation is vital for continued growth.

Mokyr’s research offers a powerful explanation for why some societies break free from stagnation and move towards sustained progress. He argues that what set the modern world apart is not simply the number of inventions, but a culture that embraced scientific inquiry and tolerated new ideas. Before the Industrial Revolution, technological breakthroughs often failed to last because inventors did not fully understand why their inventions worked. This limited their ability to improve or replicate those. With the rise of the Enlightenment, however, Europe began linking scientific understanding with practical know-how—creating what Mokyr called the Industrial Enlightenment. Knowledge was no longer confined to small groups of craftsmen or scholars; instead, it became shared, debated and applied through academies, publications and workshops. This openness allowed innovation to feed on itself, with one discovery leading to another in an upward spiral of progress.

Mokyr also showed that lasting growth depended not just on knowledge, but on the cultural and institutional climate in which it developed. In 18th-Century Britain and north-western Europe, curiosity and tolerance for experimentation replaced fear of change.

Traditional guilds and authorities that once blocked innovation began to lose influence. Inventors and entrepreneurs found encouragement and financial backing. As Mokyr explains, this openness to new ideas became a safety valve against stagnation: societies that valued reason, evidence and debate were better able to adapt and prosper. His work reminds us that economic growth is not only about capital or resources, but also about cultivating an environment that welcomes change—where science, skills and social attitudes together create the conditions for continuous improvement.

Pakistan’s business and labour environment, characterised by weak institutions, informal work arrangementsand pervasive mistrust—epitomises the absence of the cultural and institutional foundations Joel Mokyr identified as prerequisites for sustained progress: respect for knowledge, reward for innovation and sanctity of agreements. In Pakistan, knowledge is often treated as private property rather than a shared resource for collective improvement. For instance, in traditional apprenticeship and workshop systems, skilled craftsmen commonly guard trade secrets—such as formulas, production techniques or supplier networks—out of fear that apprentices might start rival businesses. This secrecy stifles learning and prevents the diffusion of “useful knowledge” that Mokyr saw as vital to innovation-led growth.

Businesses rarely invest in worker training or research, preferring cheap labour over skilled labour. At the same time, a widespread disregard for contracts—both by employers who underpay or delay wages and by workers who frequently shirk or switch jobs without notice—creates a culture of low trust and minimal accountability. Together, these patterns illustrate how Pakistan’s economy remains trapped in a cycle of low productivity and informality, where knowledge is hoarded, agreements are mistrusted and innovation struggles to take root.

Pakistan must move beyond a culture of mistrust, rent-seeking and conformity—where knowledge is hoarded, contracts are broken and mediocrity is protected. Development will come only when institutions uphold integrity, education cultivates inquiry and the economy rewards productive effort.

Mokyr’s warning that rent-seeking and coercion suffocate innovation is especially relevant in Pakistan’s economic life. Here, political and economic power often yields greater rewards than productive effort. Rent-seeking in this context means using influence, connections or coercion to extract wealth without contributing to output or innovation. In Pakistan, this takes several familiar forms. Businesses frequently face bhatta demands—illegal payments to political groups, mafias or local enforcers who offer ‘protection’ or promise bureaucratic ease in return. Large firms often secure contracts, tax exemptions or import licences through political patronage rather than efficiency or merit. Smaller entrepreneurs lacking such access struggle to survive.

Bureaucratic red tape itself becomes a marketplace for rents. Regulatory approvals, electricity connections and public contracts are routinely ‘negotiated’ through informal payments. These practices divert time, energy and capital away from improving products, skills and technology—the activities Mokyr identified as engines of self-sustaining growth. Instead of rewarding innovation, Pakistan’s rent-seeking culture entrenches mediocrity and discourages honest enterprise. Mokyr’s insights suggest that unless Pakistan curbs coercion and privilege and reorients its institutions to reward productivity and fair exchange, its economy will continue to revolve around extraction rather than creation.

Philippe Aghion transformed Schumpeter’s concept of “creative destruction” into a rigorous theory of innovation-driven growth. He showed that economies advance through a dynamic cycle where new technologies replace old ones, boosting productivity and living standards. His research revealed that innovation thrives under balanced competition—too little breeds complacency, too much deters research—captured in his ‘inverted-U’ relationship between competition and innovation. Aghion also introduced the idea of “appropriate institutions,” arguing that advanced economies must foster original innovation, while developing ones benefit from imitation and adaptation. His work provided a clear framework for designing policies that sustain innovation while keeping growth inclusive.

Peter Howitt, Aghion’s long-time collaborator, gave this framework mathematical precision in their landmark 1992 paper A Model of Growth through Creative Destruction. They showed that firms’ pursuit of temporary monopolies through research and development (R&D) fuels long-term economic growth and that open, competitive markets outperform those dominated by entrenched interests. Howitt’s modelling clarified the balance between under- investment—when private incentives lag social gains—and wasteful duplication from excessive R&D. His later work extended these insights to issues such as inequality, labour adjustment and ‘flexi-curity’ policies that protect workers while encouraging innovation. Together, Aghion and Howitt provided a lasting blueprint for managing technological change to keep growth dynamic, fair and sustainable.

A rare instance of creative destruction in Pakistan is seen in the rise of ride-hailing platforms such as Careem, Uber and InDrive. While Careem and Uber have exited the market for various reasons and InDrive remains confined largely to metropolitan areas, the ride-hailing service has transformed urban mobility by replacing erratic and exploitative taxi and rickshaw systems with app-based, efficient and transparent alternatives. These services eliminated informal price bargaining, improved reliability and safety—especially for women—and fostered a digital culture of accountability.

Such examples remain exceptional. Pakistan’s economy and politics are structured to resist change that threatens entrenched interests, often under the pretext of protecting the ‘poor’ or preserving ‘social balance.’ Sectors such as retail, logistics and small-scale manufacturing, which could benefit from technological renewal, remain constrained by vested interests and populist anxieties about job losses, suppressing the competition and innovation that drive long-term progress.

The education sector powerfully illustrates this resistance to creative destruction. Both public and private universities perpetuate the same bureaucratic, exam-driven and theory-heavy model, producing graduates with weak analytical and technical skills. Private universities, seen sometimes as symbolising social status rather than excellence, mirror public-sector inefficiencies, offering little improvement in teaching quality or employability. The religious education system remains under sectarian patronage, enriching madrasa managers while imparting little marketable skill. In many cases, sectarian loyalty takes precedence over learning, subordinating education to political or ideological goals.

For Pakistan, genuine development requires the conditions emphasised by Mokyr, Aghion and Howitt: a culture that values knowledge, institutions that reward innovation and the courage to let new systems replace obsolete ones. Mokyr’s insights remind us that lasting progress begins with respect for ideas, curiosity and openness to change. Aghion and Howitt have shown that sustained growth depends on nurturing competition, investing in skills and allowing creative destruction to unfold. Pakistan must therefore move beyond a culture of mistrust, rent-seeking and conformity—where knowledge is hoarded, contracts are broken and mediocrity is protected. Development will come only when institutions uphold integrity, education cultivates inquiry and the economy rewards productive effort rather than privilege, enabling knowledge, innovation and trust to reinforce one another in a virtuous cycle of progress.

The writer, a tenured associate professor, is head of the Department of Economics at COMSATS University, Islamabad’s Lahore Campus