Nobel Economist Backs Carney’s Push for Canada’s Independence

Nobel-winning economist Peter Howitt is praising Prime Minister Mark Carney’s policies, saying Canada is taking steps to reduce its dependence on the U.S. economy. Howitt, who shared the 2025 prize with Philippe Aghion and Joel Mokyr, initially hesitated to comment on Canada’s productivity issues due to his long absence from the country. However, during a recent lecture at McGill University, he highlighted Canada’s efforts to support economic independence, noting that the country is actively addressing its reliance on U.S. exports, government spending, and inflated housing values.

Howitt’s work focuses on creative destruction, a concept introduced by Joseph Schumpeter in the 1940s. This theory suggests that sustainable economic growth relies on new technologies replacing old ones. Howitt’s collaboration with Aghion led to insights into the role of disruption in economic progress. Notably, Schumpeter’s theory had not yet gained traction in mainstream economics by the late 1980s, when Howitt spent a year at the Massachusetts Institute of Technology as a visiting professor. It was there that Aghion, a recent Harvard graduate, questioned why Schumpeter’s ideas were absent from economic models, sparking their new research.

Their research, utilizing game theory, revealed that firms are driven by the potential for monopoly profits. This finding contradicts Schumpeter’s belief that excessive competition discourages investment. Instead, Howitt and Aghion found that competition encourages innovation, as the threat of losing market share motivates firms to invest in new technologies and methods.

Read Also: Canadian Universities Seek $10M for AI Creative Training

Howitt’s journey began at Western University before moving to Ohio State University in 1996 and then Brown University in 2000. His focus on innovation as a driver of economic growth has been a cornerstone of his work. During his time at MIT, he met Aghion, whose curiosity about Schumpeter’s absent theories in economic models sparked their collaboration. This partnership led to new research, revealing the importance of disruption in economic growth and the role of competition in supporting innovation.

There are competitive nudges in many of Carney’s policies. But the slow pace of internal free trade and open banking are just two reminders that nudging might not be enough. A successful mission will require accepting casualties. Kevin Carmichael is The Logic’s economics columnist and editor-at-large. He has spent more than two decades covering economics, business and finance for outlets including Bloomberg News, The Globe and Mail and the Financial Post, where he also served as editor-in-chief.