The talk is part of the "Lecture Series on Innovation in the Global Economy". The series provides a platform for renowned researchers in Business and Economics to present their research results and thoughts on “Innovation in the Global Economy” to a broad audience. The events tackle the challenges of globalization and new technologies for society, policy makers and companies.
Fourth lecture: The Power of Innovation and the Future of Capitalism
Prof. Philippe Aghion / Speaker
Click here to read more about Prof. Philippe Aghion
Philippe Aghion is a Professor at the Collège de France, at INSEAD, and at the London School of Economics, and a fellow of the Econometric Society and of the American Academy of Arts and Sciences.
His research focuses on the economics of innovation and growth. With Peter Howitt, he pioneered the so-called Schumpeterian Growth theory which became a leading paradigm to analyze the interplay between growth, innovation, market structure, and firm dynamics. Much of this work is summarized in their joint books Endogenous Growth Theory (MIT Press, 1998) and The Economics of Growth (MIT Press, 2009), in his book with Rachel Griffith on Competition and Growth (MIT Press, 2006), in his survey “What Do We Learn from Schumpeterian Growth Theory” (joint with U. Akcigit and P. Howitt), and more recently in The Power of Creative Destruction (joint with C. Antonin and S. Bunel).
In 2001, Philippe Aghion received the Yrjo Jahnsson Award of the best European economist under age 45, in 2009 he received the John Von Neumann Award, and in March 2020 he shared the BBVA “Frontier of Knowledge Award” with Peter Howitt for “developing an economic growth theory based on the innovation that emerges from the process of creative destruction”.
On May 30, 2024, the Center for International Economics and Business (CIEB) hosted a notable public lecture by Prof. Philippe Aghion at the University of Basel. The event was part of the broader Lecture Series on Innovation in the Global Economy, designed to address the pressing challenges imposed by globalization and increasing technological competition. The lecture titled "The Power of Innovation and the Future of Capitalism" attracted a diverse audience eager to gain insights from one of the foremost experts on economic growth and innovation.
The event started at 18:15 with opening remarks from Prof. Rolf Weder, who emphasized the importance of understanding the dynamics of innovation in today's rapidly changing global economy. Prof. Weder highlighted the significance of the lecture series, noting its aim to provide a platform for leading researchers to share their findings and thoughts on innovation with a broad audience, including policymakers, academics, and the general public.
Prof. Philippe Aghion began his lecture at 18:20, diving into the fundamentals of innovation and its critical role in shaping the future of capitalism. His presentation revolved around several key themes. He started by addressing some of the great historical enigmas associated with the economic development of human society, elaborating on phenomena such as industrial takeoff, crucial technological breakthroughs, secular stagnation, inequality, and the middle-income trap. He explained how these elements interact with innovation to reshape economies over time. This comprehensive exploration provided a historical context for understanding the transformative power of innovation.
Then, Prof. Aghion discussed Joseph Schumpeter’s concept of creative destruction, Robert Solow’s contributions to economic growth theory, and Peter Howitt’s work on the Schumpeterian growth paradigm. He explained that long-run economic growth arises from innovation shifts, with creative destruction playing a central role in replacing obsolete technologies with new ones. The entrepreneurs’ prospects of future monopoly rents drive creative destruction, yet the willingness of businesses to preserve these rents over time can prevent future innovations and block new entrants.
Further, Prof. Aghion highlighted the importance of cross-firm heterogeneity in driving innovation, noting the differences between incumbents and entrants, leaders and followers, and small and large firms. He shared several distinctive predictions from his research, such as the positive correlation between growth and firm turnover, the differential impact of competition on innovation between "frontier" and "non-frontier" technological firms, and the correlation between GDP growth and creative destruction.
A part of the lecture explored the debates over innovation and growth in developed nations. Prof. Aghion posed critical questions about whether innovation and creative destruction can improve welfare while, at the same time, protecting the environment and reducing income inequality. He also questioned how people can address the potentially detrimental effects of creative destruction on employment, health, and well-being and whether we should fear the digital and artificial intelligence revolutions.
Prof. Aghion emphasized the crucial roles that the state and civil society play in stimulating innovation and managing creative destruction. He discussed how to design policies and institutions to increase the wealth of nations while protecting citizens from the excesses of capitalism. Prof. Aghion contrasted the role of the government in providing a conducive environment for innovation through regulation and support with the influence of civil society, including consumers and shareholders, in guiding corporate behavior.
Prof. Aghion highlighted the need to redirect innovation towards clean technologies through state-led initiatives like carbon pricing. Reflecting on the systemic weaknesses revealed by the COVID-19 pandemic, he highlighted the US's issues with inequality and social protection and Europe's lag in innovation. Prof. Aghion advocated for integrating the American model's innovation strengths with the European model's social benefits, proposing a "flexicurity" approach that emphasizes education, nurturing potential innovators, and fostering competition. He also addressed the interplay between automation and employment, referencing his recent collaborative research to highlight the nuanced impacts of technological advancements on labor markets.
The lecture ensued with a discussion from 19:10 to 19:45, featuring Prof. Philippe Aghion, Prof. Frank C. Krysiak, and Prof. Rolf Weder. The panel engaged in a lively exchange with the audience, addressing the practical implications of innovation policies, regulatory frameworks, and the socio-economic impacts of technological advancements.
The event concluded with an apéro, allowing attendees to network and engage in informal discussions. Prof. Aghion’s lecture provided profound insights into the dynamics of innovation and its critical role in shaping the future of capitalism. His analysis underscored the importance of balanced regulatory policies to foster sustainable and inclusive growth while addressing the challenges posed by technological advancements and economic transformations.
