Ever wonder why some countries are just insanely rich while others can’t seem to catch a break? Honestly, it’s not just about having gold in the ground or a coastline.
It’s about rules.
Econ Nobel Prize winners spend their entire lives trying to figure out these invisible gears that move the world. Most people think economics is just about the stock market or inflation rates. It's not. It's about how we live, who gets to vote, and why a family in one country earns fifty times more than a family just across a border.
The 2024 and 2025 prizes really drove this home. They weren't just looking at spreadsheets; they were looking at history, power, and the "creative destruction" of old ideas.
The 2024 Breakthrough: Why Some Nations Fail
In 2024, the Royal Swedish Academy of Sciences handed the prize to Daron Acemoglu, Simon Johnson, and James A. Robinson.
Their work is basically a deep dive into the "Why" of global inequality. They looked at the colonial era and noticed something weird. In places where European colonizers faced high mortality rates (like malaria), they set up "extractive" institutions. They basically just wanted to grab the resources and leave.
But in places where they could actually live and settle, they built "inclusive" institutions. Think property rights, rule of law, and schools.
Centuries later, the "extractive" places are still struggling. Why? Because the elite still controls everything. The "inclusive" places? They’re the ones we call developed nations today. It’s a wild idea—that a choice made by a colonial governor in 1750 dictates your paycheck in 2026.
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Inclusive vs. Extractive: The Power Tug-of-War
Acemoglu and his colleagues argue that prosperity isn't an accident. It’s a political choice.
- Inclusive Institutions: These allow many people to participate in economic life. You own your house. Your contract is enforced. You have a reason to innovate because nobody will steal your idea.
- Extractive Institutions: These are designed to pull wealth from the many to the few. If the government can seize your business tomorrow, why would you work hard to build it today?
This isn't just theory. It's the reason why North and South Korea, which share the same culture and history, look so different from space at night.
2025 and the Engine of "Creative Destruction"
Moving into 2025, the focus shifted to how we actually keep the lights on and the economy growing. The prize went to Joel Mokyr, Philippe Aghion, and Peter Howitt.
They tackled a big question: Where does growth actually come from?
Mokyr is an economic historian who argues that growth isn't just about "more stuff." It's about "useful knowledge." He looks at the Enlightenment and how a culture of sharing scientific ideas basically sparked the Industrial Revolution.
Aghion and Howitt brought in the "creative destruction" piece. This is a term originally from Joseph Schumpeter, but they turned it into a mathematical reality. Basically, for a new, better company to thrive, an old, inefficient one usually has to die.
It’s painful. It’s messy. But without it, you get stagnation.
If we protected every typewriter company in the 1980s, we wouldn't have the laptops we use today. The 2025 winners showed that governments often try to stop this destruction to protect big donors or old jobs, but in doing so, they kill the future.
The "Nobel" That Isn't Actually a Nobel
Okay, let's address the elephant in the room. This award is technically called the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.
It wasn't in Alfred Nobel’s original will.
The Swedish Central Bank created it in 1968 to celebrate its 300th anniversary. This makes some "pure" scientists kinda annoyed. They feel like economics isn't a "hard" science like physics or chemistry.
There's some truth there. You can’t put an entire economy in a petri dish and see what happens when you raise interest rates.
But does that make the research less valuable? Probably not. The insights from people like Claudia Goldin (2023 winner) on the gender pay gap or Ben Bernanke (2022 winner) on how to stop bank runs literally change how governments function.
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Does it actually matter?
Some critics say the prize has a "Global North" bias. Looking at the list, it's hard to argue. A huge chunk of winners come from just four universities:
- MIT
- Harvard
- Chicago
- Princeton
But the tide is shifting. We’re seeing more work on poverty alleviation (like Esther Duflo and Abhijit Banerjee in 2019) and the "commons" (like Elinor Ostrom in 2009). The prize is slowly growing out of its ivory tower phase.
What This Means for Your Wallet
You might think, "Cool, some smart people got a medal. How does that help me?"
It helps because these ideas dictate policy. When the Fed moves interest rates or the government debates a new tax law, they are using the "instruction manuals" written by these econ nobel prize winners.
For example, if you understand the "creative destruction" model from 2025, you realize that a city subsidizing a dying industry is often just delaying the inevitable at a high cost. Or, if you follow Acemoglu’s 2024 work, you see why protecting the "rule of law" is actually a better long-term investment for a country than a sudden oil discovery.
How to Think Like a Nobel Laureate
If you want to apply these high-level concepts to your own life or business, start here:
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- Check Your Institutions: Are the "rules" in your life or business inclusive? Do your employees feel like they own their ideas? If not, you’re running an extractive system that will eventually fail.
- Embrace Destruction: Don't cling to a business model that's clearly dying. Innovation requires letting go of the old to make room for the new.
- Invest in Knowledge: Like Joel Mokyr says, growth comes from "useful knowledge." Stop just "doing" and start "learning."
The story of the Nobel in economics is really just the story of human progress. It’s about figuring out how to stop fighting over a small pie and start making a bigger one. It’s complicated, sure. But the basic lesson is simple: the rules of the game matter more than the players.
Actionable Next Steps
- Audit your "Inclusive" habits: Look at your workplace or team. Are you creating a system where everyone has the incentive to contribute, or are you centralizing power? Use the 2024 "Inclusive Institution" framework to build better team loyalty.
- Evaluate "Creative Destruction" in your career: Identify one skill or process you’re holding onto that is actually obsolete. Replace it with "useful knowledge" that aligns with the 2025 winners' focus on technological progress.
- Read "Why Nations Fail": If you want the deep dive into the 2024 winners' logic, this book by Acemoglu and Robinson is the definitive text on how history shapes our modern economy.