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Learning from Nobel Laureates in Economics in AI era

The Nobel Prize winners’ message is unmistakable: growth is a dance between creation and destruction rather than a steady ascent

Learning from Nobel Laureates in Economics in AI era
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Joseph Schumpeter compared capitalism to a storm, permanently destroying the old to make room for the new, when he first used the term “creative destruction”. The winners of this year’s Nobel Prize in Economics, Joel Mokyr, Philippe Aghion, and Peter Howitt, honour that same storm by describing how it started during the Industrial Revolution and how it still influences our economies, which are currently being boosted by artificial intelligence.

Mokyr’s historical lens revealed why the Industrial Revolution succeeded where earlier bursts of ingenuity failed. Ancient Rome had engineers, China had innovation, but only 18th-century Britain fused science with craft, intellect with machinery. It created what Mokyr called a “culture of growth” — a society that welcomed technological disruption instead of resisting it. Meanwhile, Aghion and Howitt mathematically formalised Schumpeter’s idea of creative destruction: growth is not a peaceful expansion of what already exists, but a turbulent cycle where new firms, ideas, and technologies rise by displacing the old. Their model became the backbone of modern growth theory — describing how “business stealing” through innovation sustains progress.

Perhaps the fastest wave of creative destruction since the invention of the steam engine is currently occurring in the AI era. Robots do surgery, chatbots write code, and algorithms identify illnesses. Every new opportunity puts an old skill at risk of going extinct. AI has the potential to replace human middlemen in fields like education, journalism, finance, and more, much like the power loom did for the handloom. History, however, provides comfort: societies that welcome change instead of stifling it grow stronger in the long run.

Consider how Britain’s tinkerers and mechanics, the “implementers” of Mokyr’s society, drove the Industrial Revolution. In a similar vein, the future of AI will depend on a new breed of digital tinkerers—data scientists, ethical programmers, and creative entrepreneurs—who convert innovation into practical uses. As Aghion and Howitt remind us, growth requires not only invention but also the right institutions: patent laws that protect creators without stifling subsequent innovation, education systems that prepare people for continuous technological change, and competition laws that prevent monopolistic stagnation.

For India, these insights are essential. Instead of opposing automation, just because it automates repetitive labour, authorities must use it to promote equitable growth. Our economic policy needs to change from protection to readiness through investments in digital literacy, ecosystems that support research and development, and reskilling initiatives for semi-skilled and informal workers. The very platforms of creative destruction that programmes like Digital India and Skill India can grow into can support long-term growth.

The laureates’ message is unmistakable: growth is a dance between creation and destruction rather than a steady ascent. AI won’t replace human potential; rather, it will enhance it if we can foster an environment that is open to innovation, protect competition, and enable our workforce to take advantage of the next technology revolution. Today’s intelligence revolution has the potential to transform data into development, much like the Enlightenment did when it transformed science into industry. However, this is only possible if we welcome rather than dread the storm of creative destruction.

The author is the Assistant Professor, Department of Economics, Loreto College, Kolkata

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