Early Monday morning, Brown Professor Emeritus of Economics Peter Howitt was awarded the Nobel Memorial Prize in Economic Sciences “for the theory of sustained growth through creative destruction,” according to a press release from the Royal Swedish Academy of Sciences.
The three recipients were awarded “for having explained innovation-driven economic growth” with a focus on new technology, the release said.
Asleep with his phone out of battery power this morning, Howitt only found out he had won the prize due to a tenacious Swedish news reporter ringing his wife’s phone several times.
“We had no champagne in the refrigerator, we were not anticipating this in any way,” Howitt said in a press conference Monday afternoon.
In a 1992 paper, Howitt helped derive a mathematical model for “creative destruction,” describing how new technologies replace old ones. As new and improved products enter the market, they replace older ones that then lose value.
“In order to understand technological progress, you have to understand that it takes place through waves of innovation that bring great benefits to mankind, but also generate tremendous losses to many people whose livelihood depends on technologies and capital that are rendered obsolete by these new technologies,” Howitt said.
The model built by Howitt and his co-laureate and co-author Philippe Aghion, a professor of economics at the College de France, INSEAD and the London School of Economics, elaborated on ideas originally theorized in the early 20th century by Joseph Schumpeter, an influential Austrian economist. Howitt is known as one of the fathers of this modern “Schumpeterian” approach to the theory of economic growth.
Howitt and Aghion share one half of the prize. The Royal Swedish Academy of Sciences awarded the other half to Joel Mokyr, a professor of economics at Northwestern University and Tel Aviv University. Mokyr won his share of the prize for explaining the requirements for the sustained economic growth that has been observed over the last two centuries.
The “simple idea” of creative destruction was understood by many, “but it wasn’t possible to really deal with (these conflicts) systematically in a mathematically coherent model until Philippe and I found a way,” he said.
A “central” point of Howitt’s work is the idea that “disruptive outsiders,” eager to make profit and interested in “shaking up the status quo,” end up “becoming the status quo” they once overturned if their innovation succeeds. Once this happens, these individuals “become resistant to people that want to do that in turn to them,” Howitt explained.
To allow the transition of innovation to continue instead of becoming “blocked by the people who used to be innovators,” Howitt called on the importance of antitrust policy, competition policy and openness of international economic trade.
“I think the United States has been at risk of allowing too much unregulated monopoly power in various sectors in recent years, and that that’s had a somewhat stifling effect on innovation and economic growth,” he said.
Howitt commented on the advent of artificial intelligence as a good example of the theory of creative destruction — while it has “amazing possibilities” for enhancing labor, it also holds “amazing potential for destroying other jobs.”
“This is a conflict that is going to have to be regulated,” Howitt said. “Private incentives in an unregulated market are not really going to resolve this conflict in a way that’s best for society.”
Before he joined Brown’s faculty in 2000, Howitt taught at the University of Western Ontario and the Ohio State University. Originally from Canada, attended McGill University for his bachelor’s degree and the University of Western Ontario for his master’s in economics, and he earned his PhD from Northwestern University in 1973. At Brown, Howitt taught macroeconomics courses even after his retirement in 2013.
The last time a Brown faculty member won a Nobel Prize was in 2016, when J. Michael Kosterlitz was awarded the prize in physics.
“At a time when the role of research in sparking innovation in new technologies is so prominent in discussions about our changing society, I’m sure that people around the world will appreciate learning more about Professor Howitt’s work, along with the contributions of the other prize winners,” President Christina Paxson P’19 P’MD’20 said in a Brown news press release.
Like Paxson, Howitt noted the importance of cooperation between universities, businesses and government to produce economic growth through technological advancement.
“I hope that will continue in the future, although I see dark clouds ahead,” Howitt said.
According to Howitt, Brown was a “spectacularly helpful atmosphere” with ample opportunities and research funds for his research, but the real highlight of his time was “sharing ideas in an open environment like Brown’s.”
“The students at Brown were extremely stimulating,” Howitt said. “I learned a lot from the graduate students I had over the years, several of whom have gone on to have really good academic careers of their own focusing on economic growth.”
Last updated Oct. 13 at 7:50 p.m.
Elise Haulund is a science & research editor and sophomore from Redondo Beach, CA. Concentrating in English and biology, she has a passion for exploring the intersection between STEM and the humanities. Outside of writing, researching and editing, she enjoys ballet-dancing, cafe-hopping and bullet-journaling.
