Three economists jointly won a Nobel Prize in late 2025 for their groundbreaking quantitative work analyzing how and why economies grow. Their calculations are complicated, but their conclusion is simple: to promote economic expansion, policymakers must promote technological innovation and fuel competition among rival companies.
The surest way to foster this 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 to drive innovation.”
These Nobel laureates demonstrated that strong patent systems directly fuel economic growth. In other words, patents do not prevent rival companies from developing competing products, as some activists claim. Quite the opposite. Intellectual property protections incentivize businesses to invest in research and development, which accelerates the discovery and commercialization of scientific and technological advances that drive economic growth.
Two of the winners in particular — Philippe Aghion, a professor at the Collège de France and INSEAD, arguably Europe’s leading business school, and Peter Howitt, a professor at Brown University — have significantly focused their research on quantifying the growth that results from “creative destruction,” the long-standing phenomenon in which companies compete fiercely to create better products and gain market share.
To illustrate their idea, they use the metaphor of a ladder. A company rises to the top by developing a revolutionary product that puts it ahead of its competitors. This success forces rival companies to pursue their own breakthroughs and move up the ladder – or fall behind. Time and time again, inventors and entrepreneurs leapfrog their competitors, with each technological advancement extending the ladder upwards, thereby spurring economic growth. Competition is fierce for individual businesses, but incredibly beneficial for society as a whole.
Of course, this type of virtuous cycle cannot occur in isolation. It is up to governments to create the appropriate conditions, providing and enforcing strong intellectual property protections.
Some people mistakenly view patents and other intellectual property protections as anticompetitive. And for those unfamiliar with the intellectual property system, this only makes superficial sense. After all, patents temporarily prevent competing companies from introducing copied products to compete with the previous inventor and patent holder.
But this vision is too simplistic and incomplete.
By temporarily protecting inventors from having their designs and technologies copied, patents give companies a chance to turn a profit during their limited time at the top of the ladder. This search for profit encourages companies to invest in new research. If every new discovery could be immediately copied, companies would have no reason to engage in risky R&D.
And by prohibiting competing companies from copying patented designs and technologies, the intellectual property system incentivizes companies to invent their own, even better products.
In other words, a strong intellectual property system prohibits companies from simply pushing each other off an existing rung of the ladder, in a zero-sum struggle. This forces them to climb higher than the incumbents.
Aghion and Howitt prove their point by examining a series of market reforms in the European Union in 1992 intended to promote competition in several EU countries. They note that these pro-competition policies “have strengthened innovation in sectors that [were] located in countries with strong patent rights, but not in industries in countries with strong patent rights [were] low.” They also find that the “positive innovation response” was more pronounced in sectors with a high concentration of patents.
In other words, competition and patent protection work together to drive innovation and economic growth.
This should serve as definitive proof to policymakers in Washington. The United States has long been a global leader in technological innovation, thanks in large part to our strong and stable system of intellectual property protection.
It is a mistake to take this system for granted. After all, patents are only reliable to the extent that institutions ensure their issuance and enforcement. And policies that erode intellectual property rights will ultimately slow the pace of innovation – and the prosperity that comes from it. The lesson for policymakers is clear: strong intellectual property protections will help our economy grow.
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