Three economists jointly won a Nobel Prize in late 2025 for their groundbreaking quantitative work analyzing how, and why, economies grow. Their math is complicated — but their conclusion is simple: to foster economic expansion, policymakers need to promote technological innovation and stoke competition between rival firms.
The surest way to foster that innovation and competition is to strengthen intellectual property rights. As two of the winners showed in a pivotal study, “product market competition and patent protection can complement each other in inducing innovation.”
These Nobel Prize winners demonstrated that strong patent systems directly fuel economic growth. In other words, patents don’t impede rival companies from developing competing products, as some activists claim. Just the opposite. IP protections incentivize firms to invest in research and development, which accelerates the discovery and commercialization of scientific and technological breakthroughs that drive economic growth.
Two of the prizewinners in particular — Philippe Aghion, a professor at College de France and INSEAD, arguably Europe’s leading business school, and Peter Howitt, a professor at Brown University — significantly focused their research on quantifying the growth that results from “creative destruction,” the long-documented phenomenon in which firms fiercely compete to build better products and win market share.
To illustrate their idea, they use the metaphor of a ladder. One company climbs to the top by developing a breakthrough product that puts it ahead of its competitors. That success forces rival companies to pursue their own breakthroughs and climb up to higher rungs — or get left behind. Again and again, inventors and entrepreneurs leapfrog their competitors, with each technological advance extending the ladder further upward, spurring economic growth in the process. The competition is cut-throat for individual companies — but incredibly beneficial for society as a whole.
Of course, this kind of virtuous cycle can’t occur in a vacuum. It’s up to governments to create the right conditions — by offering, and enforcing, strong intellectual property protections.
Some people mistakenly view patents and other IP protections as anti-competitive. And to folks unfamiliar with the IP system, that makes some superficial sense. After all, patents do temporarily block rival companies from introducing copycat products to compete against the earlier inventor and patent holder.
But that view is overly simplistic and incomplete.
By temporarily shielding inventors from having their designs and technologies copied, patents give firms a chance to generate profits during their limited time at the top of the ladder. That profit motive incentivizes companies to invest in new research. If any new discovery could be immediately copied, firms would have no reason to pursue risky R&D in the first place.
And by prohibiting rival companies from copying patented designs and technology, the intellectual property system incents firms to invent their own, even-better products.
In other words, a strong IP system prohibits companies from merely pushing each other off an existing rung of the ladder, in a zero-sum struggle. It forces them to climb higher than incumbents.
Aghion and Howitt prove their point by examining a series of market reforms in the European Union in 1992 intended to promote competition across several EU countries. They find that these pro-competition policies “enhanced innovation in industries that [were] located in countries where patent rights are strong, but not in industries of countries where patent rights [were] weak.” They also find that “positive innovation response” was more pronounced in patent-heavy industries.
In other words, competition and patent protection work in concert to drive innovation and economic growth.
This should serve as a definitive proof point to policymakers in Washington. The United States has long been a world leader in technological innovation, largely as a result of our strong, stable system of IP protections.
It’s a mistake to take that system for granted. Patents, after all, are only as reliable as the institutions providing for their grant and enforcement. And policies that erode IP rights will ultimately slow the pace of innovation — and the prosperity that comes with it. The lesson for policymakers is clear: strong intellectual property protections will help our economy grow.
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