# The Institutional Imperative for Innovation: Bridging Nobel Insights and Policy Reality
Recent Nobel Prizes in economics have powerfully reinforced that institutions are the bedrock of long-term growth, yet a troubling gap persists between this academic consensus and the narrow focus of contemporary policy debates. Scholars like Mokyr, Aghion, Howitt, Acemoglu, Johnson, and Robinson have demonstrated, through historical and theoretical lenses, that prosperity hinges on environments that foster experimentation, enable creative destruction, and uphold the rule of law. However, modern economic policy remains preoccupied with tactical issues—AI infrastructure investment, corporate tax rates—while largely neglecting the foundational question of how to design and reform the institutional ecosystems that make innovation possible. This disconnect is exacerbated by a lack of robust metrics for measuring institutional quality and intangible assets like R&D, forcing reliance on imperfect proxies and hindering systematic analysis.
The paralysis in competition policy exemplifies this institutional stagnation. Despite academic recognition that antitrust enforcement has been weak since the 1980s, political courage to challenge powerful incumbents is scarce. In the United States, antitrust momentum under the Biden administration stalled with the political transition. The European Union has hesitated to fully deploy its digital regulations amid trade threats and corporate pushback, while the United Kingdom has actively weakened its competition authority to attract multinational investment. This widespread caution keeps the policy focus narrowly on existing frameworks, allowing the institutions governing innovation, firm entry and exit, and market experimentation to become „semi-fossilized.” For instance, in Europe, high costs of business failure and restructuring stifle R&D and startup profitability, yet comprehensive „flexicurity” reforms are politically complex and not a standalone solution.
Moving forward requires flinging open the Overton window of policy ideas. Landmark reports, like Mario Draghi’s on European competitiveness, signal a growing recognition of the need for a broad institutional refresh. As the clean-energy transition accelerates and AI reshapes economies, policymakers must initiate big-picture discussions that go beyond specific agencies like central banks. They must ask: Who are today’s equivalent agents of innovation? What barriers protect unproductive incumbents? How can we build dynamic business ecosystems and public-private partnerships that foster startup formation and growth? The institutions underpinning advanced economies will inevitably change amid public disillusionment; the critical task for leaders is to steer that change deliberately by rebuilding the institutional architecture for a new era of innovation-led growth.
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