Roseann O’Reilly Runte is President and CEO of Runte and Associates.

 Along with Joel Mokyr and Philippe Aghion, Peter Howitt – born in Guelph, Ont. and educated in Canada – received the 2025 Nobel prize in Economic Sciences.

McGill University and Western University, where Howitt earned his bachelor’s degree and master’s in economics, respectively, are surely celebrating, along with the Fellows of the Royal Society, members of the C. D. Howe Institute and the Canadian Economics Association over which he presided in 1993-94.

Our attention has been, quite reasonably, concentrated on issues of war and peace during the last few weeks. And yet, the lessons we can extract from the works of these brilliant economists are worth reviewing in these days when national budgets (not to mention the cost of Blue Jays’ tickets) are on our mind.

We are all aware of boom-and-bust economic theories along with their characteristics and causes. Growth emanates from a major discovery or a flurry of innovative technologies that have been adopted, spurring production and employment.

For example the California Gold Rush in 1849 contributed to the settlement of the West and the acquisition of wealth by the fortunate few. The steam engine fuelled industrial growth and the migration of poor rural workers to mines and factories, creating new industries and both a wealthy class and the urban poor.

Then there is the work of Austrian political economist Joseph Schumpeter who theorized that periods of innovation displacing workers are then followed by new spurts of creativity, effectively linking the “boom” to the “bust” in a cause-effect relationship and a perpetual boom-and-bust cycle.

Mokyr, an American and Israeli economic historian, saw that throughout history innovation has been fostered by the freedom to create and compete. He noted that education and policy, which provide incentive and encourages risk-taking while protecting the growth of enterprise, are key to creating a climate where a dynamic economy and the common good can flourish.

French economist Aghion added that both economics and culture affect progress. Social inclusion and the growth of human understanding and capabilities contribute to society’s progression toward productivity and wealth.

Innovation requires scientific knowledge, know-how and a culture that values thought, experimentation and exploration. Speaking to the moral promise of capitalism, Aghion saw that governments can protect social welfare while fostering creativity and encouraging the adoption of the results, driving economic growth.

Howitt, with his work on “creative destruction,” (a term first popularized by Schumpeter) concluded that change, a driver of capitalism, effectively results in cycles of creativity causing change which are followed by the emergence of new innovations, accounting for instability in employment and the economy while contributing to growth.

Howitt was concerned with the moral and social responsibility to balance private gain and social welfare, the need for both collaboration and competition, the availability of lifelong learning and highly specialized scientific training.

His work along with that of Mokyr and Aghion is optimistic in the belief that inevitable change can lead to progress when there is support for educational institutions, appropriate government policies and innovative thinking that will apply and develop the ideas that will contribute to the social and economic growth of the population.

The impact on human activity in an AI world

When runners complete a marathon, they pause to catch their breath and recover. When students take their final exams, they need a break. When the economy has heavily invested in a particular sector, it takes time to shift directions and funds.

In countries with strong educational systems and policies supporting the development of industry and enterprise, there will never be a shortage of innovative ideas waiting to be taken up and developed into new opportunities for economic expansion. Today, the question is, however, one of timing and of the implication for human activity in an AI world.

There is no doubt that people are worried, not as much about a short pause in growth, but more about a triad of tough topics. The first two are the need to obviate risks to the environment and human health in future development while remediating the damage previously caused.

Good government and smart policies provide the means and the tools necessary to respond to these challenges. Brilliant, innovative scientific, social and industrial development will lead to solutions to these issues today as they have in the past.

There is a big agenda and a lot of work needs to be done. However, people have come together in the past to overcome great challenges and it can happen again.

The third fear is the lack of employment, meaningful activity, the ability to participate, and the potential loss of control caused by AI, not just in a single sector but across many. This is the source of concern across the population, not only for Canada, but for the world.

Applying the theories of the three Nobel laureates, one can posit that a highly educated population will have the capacity to control what it creates and that the collaborative support of others will be key to our own success.

We may view AI as a continuation of the progress of society and the economy, one to which we will adapt and which will allow us to use our human capacities to move beyond the tasks we currently perform to new endeavours that will promise a better future. We now need the imagination and creativity of innovative minds to identify the meaningful work of the future. Human beings have adopted and adapted to a myriad of technologies over the centuries. The past and the work of the recent Nobel laureates provide reason to hope and to focus our minds on the possibilities the future holds.

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