The 2025 Economics Nobel: A Critique of 'Creative Destruction' in an Era of State-led Growth
UPSC Relevance
Prelims: Indian Economy (Concepts of Economic Growth & Development, Economic History - Washington Consensus, Neoliberalism, Role of State vs. Market).
Mains:
General Studies Paper 3 (Economy): Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment; Investment models; Effects of liberalization on the economy. This article provides a critical perspective on dominant economic growth theories.
General Studies Paper 2 (International Relations): The geopolitical context of the US vs. China economic models is relevant.
Key Highlights from the News
The Nobel Prize in Economic Sciences for 2025 was awarded to Philippe Aghion, Peter Howitt, and Joel Mokyr for their study on innovation-driven economic growth.
The core of their study is the concept of "Creative Destruction", popularized by economist Joseph Schumpeter. According to this, new innovations destroy old technologies, thereby driving the economy forward.
Author's main criticism:
This theory is based on a capitalist model reliant on free markets and private enterprises.
However, in state-led economies like China, governments directly intervene to make significant advancements in technology and innovation. This theory fails to explain this reality.
It is a great paradox that this theory, based on free trade, receives the Nobel Prize at a time when America itself is moving towards protectionism.
The author states that this Nobel Prize should be seen as a "warning" about the importance of free markets, competition, and scientific freedom.
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