First reactions. Telephone interview, October 2025

“It’s fantastic, Peter, isn’t that great? Yes!”

Listen to Philippe Aghion telling Peter Howitt that the Royal Swedish Academy of Sciences has been attempting to call him, captured as part of this call made shortly after the public announcement of their joint 2025 economic sciences prize. In this conversation with the Nobel Prize’s Adam Smith, Aghion also reveals his joy and surprise at the news, discusses the implications of their ‘creative destruction’ model of sustained economic growth, and suggests paths to ensuring that the fruits of growth can be more widely shared.

Interview transcript

Philippe Aghion: Hello?  

Adam Smith: Hello, my name is Adam … 

PA: Yes? 

AS: Hi! 

PA: Yes. How are you? With a good, good morning. I don’t know. We’re almost afternoon now. 

AS: Exactly. My congratulations.  

PA: Oh, thank you so much. I’m still not realising, you know, I’m… I was sure I would not get it this year. I was very kindly rewarded, two, three weeks ago by a honorary degree from Stockholm University. I was in Stockholm, and I was sure that this, the Nobel would not be for this year.  

AS: That’s marvellous. Where did they actually reach you?  

PA: They spoke to me and, voilà, they, just announced to me, and then, voilà, we had the press conference, at 11:45.  

AS: I just spoke to Peter Howitt and he actually hasn’t spoken to the Royal Swedish Academy yet. He’s only been called by journalists in North Carolina. 

PA: Yeah, but you know, the problem is that they could not get a hold of him. So it’s strange. Oh, he’s on the phone! One second, one second. Voilà, attend. One second. 

Speaker 3: I managed to get him on the phone. 

PA: Peter, Peter, make yourself available! Your phone! They’re trying to reach you! 

Speaker 3: It’s not working, he has a problem with his phone.  

PA: It’s fantastic, Peter, you imagine!? Peter, isn’t that great, no? Oui! Yes! Yes! Yes! All the best, it’s so fantastic and my big love to, to Pat. Bye-bye Peter. Great. Bye-bye.  

You see Peter Howitt just learned about it from journalists. 

Are you with me?  

AS: Yes, I am. 

PA: Yeah, it’s crazy. I just had Peter Howitt–  

AS: I heard you, I heard on the telephone. That was just beautiful to listen to. Thank you very much indeed. But so, obviously the partnership between you and Peter Howitt is something very special.  

PA: Yeah, absolutely. Absolutely. We developed together this new paradigm. It was in -87. We met in the fall -87. I was first year assistant professor at MIT, after a PhD at Harvard. And Peter was a visiting professor for a year from Western Ontario at the time, and he visited during the academic year, -87, -88. And we did our model at that time.  

AS: And the relationship has continued, the collaboration has continued and it was so fruitful. 

PA: Yeah, we collaborated over the years, absolutely. We wrote a book, you know, we wrote two books together. And we produced other papers, on growth and unemployment, on growth and competition. We developed a lot, the approach together. I have collaborated with other people, but I mean, we did a lot together. 

AS: Indeed. One question about your model. So your model brings together technologies, entrepreneurs, the firms and shows how this feeds in to give sustained growth. And it allows you to make predictions about how different policies might change sustained growth. So are there some lessons that come from your model that you’d particularly like to emphasise? 

PA: Oh, yes. Absolutely. You look at the Draghi report or the world development report on middle income drop. It’s direct, our approach. The main idea is that long run growth is driven by cumulative innovations. Second idea – innovations result from entrepreneurial activities, you know, aim at getting innovation runs. The third idea is creative destruction, new innovation displace old technology. There is a contradiction at the heart, of course, because yesterday’s innovators may use their runs to prevent subsequent innovations, managing the market economies to deal with this contradiction, you see, and that’s at the heart of plenty of things.  

AS: What is the most important thing that policy makers need to do to try and make that transition, that creative destruction smoother and that there aren’t blocks to it?  

PA: Yeah, I’m very fond of the Danish flexicurity system. I think that’s a good way to reconcile creative destruction with protection. You see, you lose your job for two years, you get a high salary and the state helps you retrain and find a new job. And then you need to put in place labour market policies that, make creative destruction, that you get the best out of it. That’s one institution which is very important. So you need the policies, competition and industrial policy combined is smartly, but you need the flexicurity system as well.  

AS: Lastly, although many benefit, there are many who feel alienated by this and are scared. What would you say to them? What would you say to those who feel disenfranchised by the growth?  

PA: I would say that there is a way to make an economy more innovative and more inclusive. I would say flexicurity, education, and allow new talents to create new firms, to undertake, to make it possible and easy for anyone who wants to work, wants to achieve, to achieve. You see what I mean? That’s what I mean. So it’s both education, to have talents emerge, but also, don’t make a firm’s life difficult. Don’t make entry difficult. Make it that talents can come in and blossom. You see, that would be my main thing, so that people would feel that they’re all part of the process.  

AS: Thank you very much indeed, beautifully said. We’ll talk about it more when things get quieter and we have time to talk.  

PA: I look forward to meeting you there. Thank you so much.  

AS: Thank you so much. 

PA: Bye-bye. 
 
AS: Bye-bye. 

Did you find any typos in this text? We would appreciate your assistance in identifying any errors and to let us know. Thank you for taking the time to report the errors by sending us an e-mail.