Philippe Aghion: 'Competition, education, flex-security are the pillars of a successful growth structure'

3 months ago

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00:00In other news, he was one of the authors of a key report submitted to President Emmanuel Macron last year,

00:05outlining how France could take the lead in the field of artificial intelligence.

00:10Philippe Aguillon on Monday shared honors with Joël Mokir and Peter Howitt for the Nobel Economics Prize.

00:19His explanation of how creative destruction can drive economic growth

00:24is one of those cornerstones that people are talking about in this age of artificial intelligence.

00:32Siobhan Silk has more.

00:35Why do humans live so much better now than our ancestors did?

00:40That's the main question tackled by the trio of academics

00:43who've been awarded the 2025 Nobel Prize in Economics for their work on how innovation drives growth.

00:50American-Israeli Joël Mokir took half the prize for his long-term studies based on historical sources,

00:58while French economist Philippe Aguillon shared the other half with Canadian Peter Howitt

01:06for their mathematical model quantifying creative destruction,

01:10the idea that innovations destroy older technologies and businesses,

01:15but in the long run generate stable growth and improve human welfare.

01:19It's particularly timely amid growing anxiety over the AI revolution

01:24and its potential to make many jobs obsolete.

01:28With the understanding of the mechanisms of creative destruction provided by the laureates

01:33and the follow-up research,

01:36we have a better chance to make sure growth can continue

01:40and be guided in the direction that benefits humankind.

01:44Reacting to their win,

01:46Howitt and Aguillon warned against the protectionist policies of the current U.S. administration,

01:52saying they could stifle innovation.

01:55Anything that gets in the way of openness is an obstacle to growth.

01:59So I see their kind of dark clouds currently, you know, accumulating.

02:04The three laureates will each take a share of the one million euro prize.

02:07Philippe Aguillon says he intends to invest his part in his research lab at the Collège de France

02:13and INSEAD Business School, helping to fund young researchers' work on AI and green growth.

02:21He says he still doesn't like seeing himself on camera.

02:23Philippe Aguillon, Nobel Economics Laureate, is with us in our studios.

02:27Thanks for joining us here on France.

02:29Very nice seeing you.

02:30I heard on the radio the other morning, you giving an interview,

02:33where you said that the Nobel Committee actually asked you for the phone numbers of the other winners?

02:38Absolutely.

02:39Tell us what happened.

02:41No, I mean, they were not sure because they tried.

02:43It was not working.

02:44So they wanted to double check, probably.

02:46I think they had some numbers, but they wanted to double check.

02:49So they asked me to look for.

02:50I had the phone number of Peter Howitt, although not at hand, which is true.

02:55And my assistant had the number of Joël Mokir, but I could not tell my assistant what it was for,

03:02that I needed that number.

03:03So I had to call my assistant, ask her for the phone number of Joël Mokir,

03:09without telling her the reason why I needed that number.

03:13And she didn't guess why.

03:14Okay, so you don't like seeing yourself yet on TV, but you've got to brace yourself, right?

03:18Because imagine the next time you're in the faculty lounge at the Collège de France,

03:24are people going to look at you and say, oh, it's Philippe?

03:27Or are they going to say, oh, it's the Nobel Economics Laureate?

03:30Remember that the famous philosopher Jean-Paul Sartre refused the Nobel Literature Prize

03:34because he didn't want to be known as the Nobel winner for the rest of his life all the time.

03:38I think, you know, yeah, I think you can live.

03:44I'm very happy to have received the Nobel because it rewards the whole line of research.

03:50I think it acknowledges, you know, a whole new way of thinking about the growth process.

03:57There was what we used to call the neoclassical growth paradigm.

04:01It was the Solo model, the model of Robert Solo.

04:04He was a wonderful man, Robert Solo.

04:05But it's a model whereby growth is, you know, driven by capital accumulation primarily.

04:12So that was the paradigm.

04:13And capital accumulates, you produce more GDP, more output, you can save more.

04:20And the savings turn into investment, into new increasing capital stock.

04:24And you keep growing this way.

04:26That was the Solo model, okay?

04:28Nothing to do with innovation.

04:29It was pure capital accumulation, output, savings, investment, capital accumulation.

04:36And in our paradigm, you know, really the key role is played by enterprises.

04:44You see, I mean, the core of our paradigm are the firms, the firms that innovate to find new products

04:53or to better products or more efficient way to produce.

04:56And that's what, you know, drives productivity growth is the innovation activities of firms.

05:01So firms that innovate, is it firms that take big risks?

05:06They take, of course, big risks.

05:08They need incentives.

05:08Because you can try and fail.

05:10Of course, and they may fail.

05:11So that's why you need to create a business, a favorable business climate for them to be, you know,

05:16to be willing to invest in innovation, which is very risky, rather than, you know,

05:20invest in real estate or pension funds or, you know, when someone puts their own funds

05:26or their own money into a risky undertaking, it's not the same as if you put, you know,

05:31your private savings into, you know, a bank account or whatever.

05:37So it's a world, our world is a world where all the time you have new talents, new talents

05:43become new startups, and the new startups come to challenge existing firms.

05:48You see what I mean?

05:48And so it's a model where you want to encourage firms to innovate because they will get innovation

05:53once.

05:54But later on, they may be tempted to use their rents to prevent subsequent innovations

05:59because they don't want themselves to be subject to creative destruction.

06:03So you see, there is this contradiction at the heart of the growth process.

06:06On the one hand, you need innovation grants to induce firms to innovate.

06:11But on the other hand, they are tempted to use their rents to prevent subsequent entry

06:15and subsequent innovation because themselves don't want to be subject to creative destruction.

06:20So how do you deal with this contradiction?

06:22You see?

06:22And you must have had many years of, I guess I can only call it heartache,

06:28because 1992 is when you co-author this paper.

06:32But in fact, we started to work on it in 87.

06:34Oh, 87.

06:35We met.

06:36Even earlier.

06:36We worked on it.

06:38We did it in 87.

06:39Nobody in those days had a cell phone or…

06:42No.

06:43And so 1987 was the year of a big stock market correction.

06:51There was going to be financial crisis that followed.

06:53And yet, you co-author with Peter Howitt this paper in 1992.

06:58And for years, decades afterwards, the jobs that people go to are not the entrepreneurial innovation jobs.

07:06They're things like working in the city of London for a big trading firm or for a bank.

07:11It's true that whenever you have waves, you know, when you have new technological waves,

07:17people tend to go too much into the financial sector.

07:20So we need finance, of course.

07:21You need venture capital, institutional investors to finance innovation.

07:26But sometimes what happens is that there is too much, you know,

07:30attraction for finance at the expense of the real economy.

07:36And so you now have this model.

07:40When you talk about innovation, do you understand how some of our viewers might be a little bit intimidated,

07:47dare we say scared, this notion of…

07:50Because, you know, people feel intimidated when they see new gizmos and…

07:55Because they're afraid of losing their jobs, for example.

07:58And that's why it's so important.

07:59And that's why I advocate a lot kind of the niche system of flex security.

08:03When you lose your job, you get, you know, 90% of your salary for two years.

08:08You are retrained and the state helps you find a new job.

08:11I think it's very important, you know, to make creative destruction socially acceptable

08:16and to make sure that nobody is left out of the process.

08:20It's very important to have this kind of flex security system that they have in Denmark.

08:24And it's also very important to have a good education system.

08:27Because at school, you learn to learn.

08:29At school, you learn to be adaptable.

08:31If you don't go to good schools, you don't know how to adapt.

08:35So I think the combination of good schools, of a very good ecosystem for everybody,

08:39you know, like in Finland, like in Korea, if you have a good education system

08:43combined with a good flex security system, then there will be less reluctance to the creative destruction,

08:49you see, which is the driver of growth.

08:52Growth is really economies that are dynamic.

08:54Are those economies where all the time you have new talents, new firms that come in, grow,

08:59and challenge existing firms.

09:01And existing firms, if they want to survive, they need to innovate again.

09:04Or if they don't, well, they have to, they are driven out of the market.

09:09You see what I mean?

09:10And that's what drives growth.

09:12But then first you need new talents.

09:14Where do new talents come from?

09:15From schooling.

09:16So if you don't have good schools, you have very few new talents.

09:19Excuse me, Philippe Aguillon, you're French, right?

09:22And in France, the schooling is very top-down.

09:25You probably endured like I did, sitting on the benches of big amphitheaters

09:30where the professors who are then called mandarins sometimes.

09:35Yeah, that's right.

09:36That's not a recipe for innovation, is there?

09:37No, but there are two things.

09:39You talk about universities.

09:40I talk about, you know, primary, secondary schools.

09:43Right.

09:43We need primary, secondary schools that deliver good test scores.

09:47You see, good PISA tests.

09:48So I mean, very much at school in favor of going back to calculus, reading, dictations.

09:57It's very important that, you know, high school students really master the basic knowledge.

10:03You see, I think that's very important.

10:05And then on top of that, you can study history, geography.

10:08But calculus, reading, basic literature, they need manuals.

10:13They need, you know, books.

10:14Books, don't use books, read paper books.

10:17Books, and I think that's very important.

10:20And we used to have a school like that in France, and we lost it.

10:25We've lost it.

10:26We lost, well, yeah, the school.

10:28We have very good teachers.

10:29We have really devoted, fully dedicated teachers in high schools in France, in primary and secondary schools.

10:36But the system is organized in such a way that the public school system in France no longer delivers the promise of opportunity for everybody.

10:45And why is that?

10:46Why is that?

10:46Is it because, well, the decision is that the private sector is good and we shouldn't be putting our money?

10:52No, no, no, no.

10:53I mean, it's good to have the primary sector.

10:54But I think, you know, we had migrations.

10:57We had new ways of migration.

10:58We would need, we needed classes with, you know, 15 students at most.

11:03We had excessively numerous class, you know.

11:07So lack of funding for education.

11:10And so then if there were students left behind, the teacher doesn't have time to care about them.

11:16So we need schools where there is nobody left behind.

11:19When anybody is left behind, she or he can have tutorship, can be helped, can the homework done at school.

11:26All this we didn't have, you see.

11:27We need to invest in schools so that we can really make sure that nobody is left out.

11:33The problem with the French schooling system, there are a lot of wastes, a lot of children who get out of it,

11:39barely knowing how to read and write.

11:42And that's not right.

11:43That's not good.

11:43So there may be.

11:44They should.

11:44No.

11:45It should be maybe cold comfort.

11:47But you compare the United States to Europe and you say the U.S. does poorly on inequality

11:53on the social safety net that you're describing there.

11:55And Europe does poorly on innovation.

11:59Exactly.

11:59You know, that's right.

12:01And so is this trend going to continue?

12:05Well, I hope not.

12:05There is a Draghi report.

12:07You know, Mario Draghi recommends that we wake up and we try to revert trend.

12:13I mean, the European per capita GDP is declining compared to the U.S. per capita GDP.

12:19We need to get our acts together and become a frontier innovator space.

12:25So we need a single market, a truly single market, you know, for goods and services,

12:30which we don't have.

12:31You have too many gold plating.

12:34Each country, each member state in Europe has its own regulation on top of the European

12:38regulation.

12:38We need a good financial ecosystem of innovation, venture capital, institutional investors.

12:43We don't have like in the U.S.

12:44And we don't have the equivalent of the DARPA, Defense Advanced Project Agency, this very

12:49pro-competition way of doing industrial policy.

12:51You have that in the U.S.

12:52You don't have that in Europe.

12:53So I think on all those dimensions, we can improve a lot in Europe to become more innovative.

13:00And on top of that, I would add the education and the flex security to make sure that, you

13:06know, the creative destruction that we generate is socially acceptable.

13:10But that's where Europe needs to wake up.

13:12All right.

13:13Creative destruction.

13:14That term sounds a little bit like when Mark Zuckerberg talked about move fast and break

13:20things to people.

13:21Yeah, but break things in a way which does not endanger social, you know, social safety.

13:28We need social safety nets.

13:29We want to make sure that people feel comfortable with it.

13:32Right now?

13:33Like in Denmark.

13:34In Denmark, there is no negative effect on health of you or losing your job.

13:37There's been studies on that by my friend Alexandra Roulet.

13:40No negative effect on health in Denmark of losing your job.

13:43In U.S., you have the death of despair phenomenon, which Anne Case and Angus Deaton have pinpointed

13:49so well.

13:49So that's the big difference is that we need, on top of the Draghi recommendation, we need

13:54to have good education system and good flex security system to really make sure we don't

14:00run into populism.

14:01You see, why do you have Trump or Mrs. Le Pen on the doorsteps of the Elysee and Matignon?

14:07Because there were many people in France or in our countries left out of the process.

14:13You see, abandon.

14:13That felt abandoned.

14:15Nobody should be left abandoned.

14:17Should be left out of this, you know, quest for more innovation and more innovation-based

14:25growth.

14:25More innovation.

14:27One final question, Philippe Aguillon.

14:29We're talking about artificial intelligence now.

14:32And you've argued that it can be a factor for that innovation.

14:37Absolutely.

14:37It's a big driver.

14:39You know, this interview, if there's a transcript of it, AI will eat it, will digest it.

14:44And for some, that's not innovation.

14:47That's theft.

14:49And they're taking people's…

14:51Ah, I know.

14:51That's right.

14:51But there is a good and bad use.

14:53But the good use of AI…

14:54Taking people's content, their copyright…

14:57Of course.

14:57That's why you need regulations.

14:59So you do need more regulations.

15:00Too many regulations can get in the way of competition.

15:03So you need the right regulation.

15:05But avoid over-regulating, because when you have too many regulations, incumbent firms

15:09know how to cope with them.

15:10New and trans don't.

15:12So you want to make sure you have the right regulations, but not too many regulations,

15:15because then it stifles competition.

15:19And we know that the big problem with IT is that IT boosted growth initially.

15:25But then you had a growth decline because you had the emergence of superstar firms that

15:29discouraged new entry, you see.

15:32And because competition policy was not adequate, we let those firms grow unboundedly through

15:38merger and acquisition.

15:40And now we have to be very careful.

15:42Competition policy has to be there to make sure that the AI revolution will not end up

15:47having two or three dominant firms that will deter any innovation by anybody else, you see.

15:53It's always this thing.

15:54I need to have always newcomers.

15:56I don't want some kings, a few superstars, to just discourage all potential new entrants.

16:02And that's where competition policy is so important.

16:05Competition, education, flex, security.

16:08Those are pillars of a successful growth through creative destruction.

16:12And we look forward to hearing your speech in Stockholm on December the 10th.

16:16Congratulations again.

16:17Thank you so much.

Philippe Aghion: 'Competition, education, flex-security are the pillars of a successful growth structure'

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