No, Nobel economists still haven't cracked down on how to innovate
Philippe Aghion and Peter Howitt, recent Nobel Prize winners in economics, will end up shaping how European governments think about innovation for the next decades. And that's not good news.
As a foreword, today I'm stealing most of Franck Aggeri wonderful chronicles (in French) about how the recent Nobel in economics is rather misleading...
Franck Aggeri
The GDP mirage
Economic growth, measured by the almighty GDP, is the national vital sign for governments in Europe and abroad. The problem is, GDP is such a macro aggregate that it's difficult to really understand what it measures and, most importantly, what really influences it. But sure, it’s easy to read, easy to plot, and above all, easy to communicate.
Europe, in particular, is addicted to this simplicity.
For decades, we’ve built our innovation frameworks on this same logic: what can be counted must be managed. We count patents, R&D expenditure, startup valuations, and venture rounds. Do they matter? Well, again, they are mostly easy to read and comment on. In reality, we still don’t have a proper benchmark linking innovation to economic transformation.
Philippe MEDA
I addressed why "money raised" and valuations rounds are the crappiest benchmarks ever in a last year's article...
Our public policies, therefore, fall short because they focus more on spinning a complex reality into simple messages, without addressing the messy, unpredictable nature of innovation itself.
Schumpeter’s forgotten lesson
Joseph Schumpeter, the economist everyone quotes about 'creative destruction, ' is not read anymore with proper attention to the depth of his work. Few actually understand that, beyond designing equations (which economists love), a pillar of his work was observing entrepreneurs, their motives, their fears, their hunger for prestige and transformation. Innovation, in his eyes, was not an abstract variable in a productivity model but first and foremost a human phenomenon.
And from what I read, it seems that modern economists like Philippe Aghion and Peter Howitt inherited Schumpeter’s vocabulary but not his vision. They replaced the entrepreneur with the system, and creativity with policy. Innovation, in their framework, is a macroeconomic mechanism to fuel growth, something you can optimize with the right tax incentives, R&D credits, or startup subsidies.
Even if I consider that Aghion and Howitt are much more nuanced in their work, the sticky part of their messaging will nonetheless be dumbed down to "all in on AI with tax incentives."
It's pretty disheartening.
The illusion of tech salvation
For twenty years, Europe has been told the same story: innovation equals technology, and technology equals growth. The Lisbon Agenda, Macron’s “start-up nation,” Horizon Europe... all were built on this mantra. The result? A continent full of R&D programs (like we had in the eighties) and yet little real disruption. Innovation policy has become a bureaucratic exercise: fund labs, count patents, issue press releases.
And today, the new obsession is Artificial Intelligence.
Economists see in AI the next “technological frontier,” the new engine that will finally relaunch productivity. But it's not rational. Not a single technology has ever been responsible for advancing nations throughout human history. Not the wheel, the printing press, the steam engine, or, more recently, 'computers' were single-handedly responsible for anything. It's always been about decades of multiple collisions and random events connecting in a chaotic forward motion.
And I genuinely think that having been properly trained as a biologist makes me see a level of economic reality much more clearly than any economist. Not because I'm smarter (I'm Ok if you think I am 🥰), but because I see complexity and emerging behaviors from a different cultural standpoint. One that knows that no simple macro formula to Everyhthing™️ will
I'm not saying that AI is a dumb bet for the future, but should we give up on biotech, quantum technologies, or the nuclear revival that could decarbonize our future? Should we let entire industrial capabilities rot because the next budget cycle worships algorithms? And if not, what is the proper ratio of tax incentives applied to AI vs high-speed manufacturing? Which ministry will decide how these deeply interconnected trends will play out together?
Betting everything on AI is sheer intellectual laziness.
The container lesson
Worse, transformative innovation doesn’t always come with a tech tag. Consider the shipping container: a low-tech metal box that multiplied supply chain efficiency by ten. It didn’t rely on a new material, a patent, or deep learning. It wasn't promoted by a single visionary company, government, or thought leader... It was a long-in-the-making, emerging systemic redesign of how goods move around the world. An organizational breakthrough, for sure, without any technological patent.
This is what Schumpeter understood.
Transformation often comes from new combinations of existing elements, not from the invention of something fundamentally new that makes the world different overnight.
By obsessing over “frontier technologies,” we forget the quiet revolutions happening in logistics, organization, services, and culture. The ones that actually reshape economies but are difficult to identify and fund with narrowly targeted "well spent" public money.
The wrong thermometer
In the end, we circle back to patents and R&D expenditures as, at best, peripheral measures of transformation. Easy to come up with, but rather unthetered from the fundamental dynamics of change. The truth is, Europe doesn’t know how to see innovation anymore. Our instruments are outdated and our thermometers broken.
What if Europe’s challenge was not to run faster in the same direction as the US or China but to change direction altogether?
Are we really so in distress that we can't replace the illusion of control with the reality of complexity? Adjusting to new, broader metrics? Not just GDP growth but indicators of transformation, resilience, and value creation beyond the market. Most of all, can't we return to what Schumpeter understood a century ago: a profoundly human adventure, messy, unpredictable, and driven by talents easily moving around Europe, entrepreneurial cross-pollination with transnational tax incentives, and, oh, I don't know, a bloody European NASDAQ!
To quote both Franck Aggeri and Gilles Lecerf:
The United States may well be at the cutting edge of digital innovation and may even enjoy stronger economic growth than Europe, but it is also a country where infant mortality is rising, life expectancy is falling, social inequalities are exploding, and per capita environmental impact is among the highest in the world.
