If you graph the history of economic growth, it looks a lot like a hockey stick laid on the ground with its blade sticking up. That is, economic growth was pretty flat for millennia, and then, around 1800, it points upward towards the sky.
It’s no secret that this inflection point — where the stick’s handle and blade meet — was the Industrial Revolution. That was a crucial turning point in the history of humankind, when we left economic stagnation behind and began seeing monumental improvements in the economy and our standard of living.
But why around 1800? Why did economic growth continue propelling upwards after that point? And why was Britain the first society to experience this revolutionary change?
The economic historian Joel Mokyr, a professor at Northwestern University and Tel Aviv University, was co-awarded the 2025 Nobel Prize in economics this week for his decades of research trying to answer these questions. (The economists Philippe Aghion and Peter Howitt share the other half of the 2025 prize, “for the theory of sustained growth through creative destruction.”)
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For Mokyr, a crucial reason why Britain became the epicenter of the Industrial Revolution in 1800 has to do with science and technology. True, many societies before Britain had seen scientific breakthroughs and technological progress. And sometimes, Mokyr finds, that led to some economic growth. However, no society saw their economy catapulted into a kind of sustained escape velocity away from stagnation before.
Mokyr centers his explanation on why Britain was different by highlighting how it embraced science, technology, and disruptive change. He puts a lot of emphasis on the role of the Enlightenment, or the intellectual awakening in science, philosophy, politics, and other realms that swept Europe during and around the 18th century. It was a movement that revolutionized intellectual and political life and helped speed up technological progress.
But that still doesn’t explain why it was specifically Britain that became the epicenter of the Industrial Revolution. Other European nations, including especially France, also experienced the Enlightenment.
Mokyr’s research suggests that Britain was different because, essentially, the Brits operationalized the Enlightenment in the real economy more than other nations. It wasn’t just that scientists, philosophers, and other thinkers had big intellectual breakthroughs. In Britain, these scientific discoveries and a new way of thinking filtered down to a skilled class of mechanics and entrepreneurs and other “tweakers and tinkerers” who put new ideas to practical use in the economy. In this way, “macro inventions” — or big, paradigm-shifting scientific discoveries — fed a slew of practical, “micro inventions” that practitioners used to incrementally reshape the economic machinery of society, boosting productivity and rocketing economic growth to the moon.
So, yeah, science and technology are super important for economic growth. But the crucial ingredient, according to Mokyr, was that there was also a skilled population of workers and entrepreneurs who were willing and able to put those advances into real use in the economy. Mokyr also emphasizes that British political institutions — in particular, its Parliament — were more open to the disruptive changes (or “creative destruction”) these new technologies unleashed, which often challenged the power and prosperity of entrenched interest groups.
And here is where the other Nobel winners this year, Philippe Aghion and Peter Howitt, help color in more of the picture. They place creative destruction at the center of their popular mathematical model of economic growth.
Creative destruction is an idea that’s associated with the late Austrian economist Joseph Schumpeter. It refers to the healthy process of new technologies, products, and businesses replacing outdated ones in a market economy. This process of change involves older businesses shrinking or even dying and, often, workers losing their jobs. So, yeah, there are losers in the process, and, throughout history, elites and interest groups have sought to block creative destruction. But economists, including Aghion and Howitt, theorize it’s a crucial process for economic growth.
It’s a lot to chew on as the globe grapples with the rise of a new wave of disruptive technologies, including artificial intelligence. But the Nobel winners’ work suggests that embracing this technological disruption — and finding ways to operationalize these big breakthroughs in the real economy — will be crucial for the hockey stick’s blade to keep pushing upwards.
Anyways, we’re happy to say that Joel Mokyr has been a guest on Planet Money before. Check out our episodes: When Luddites attack and Imagining a world without oil. Mokyr also provided inspiration for a fictional audio drama we made once, long ago called, “The Last Job.”
And, if this history-of-ideas type story is the kind of reading you’re into, may I encourage you to click here to pre-order the Planet Money book. There’s a whole chapter on what causes economic progress and the role of technology among other things, it gets into more depth than we have space for here. It has some fun visuals, too. Planetmoneybook.com. Tell a friend.
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The Indicator has more on the Nobel, including how the winners see this work applying to 2025 and the growth potential (and risks) of AI and current technology.
On Planet Money, Mary and Kenny tackled the dreaded Trilemma! Or, as we put it in the title, How the government got hedge funded. How private investors are buying up so many Treasuries to make “the basis trade” that some people worry it is increasing the chances of another huge crash.
And if you missed it, catch up on The Indicator’s ‘Vice Week’ series on the cutting edge of crime. True crime meets economics. What more could you ask for?
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