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The Constitution of Innovation
By Luis Garicano, Bengt Holmström & Nicolas Petit · Nov 10, 2025
At the end of the Second World War, Europe was a devastated continent and much poorer than the United States. Despite this unfavourable situation, in the following decades it managed to achieve an extraordinary recovery: between the 1950s and the 1980s, average income grew rapidly, productivity made a significant leap forward, and the amount of time devoted to work decreased considerably.
In that period, many European economies not only closed the gap with the United States, but in some technological sectors – such as aeronautics and nuclear energy – even helped push the frontier of innovation forward.
This momentum, however, gradually faded. Starting in the 1980s, and even more clearly in the 1990s, European growth began to slow down.
While the United States maintained a relatively stable development rate of around 2% per year, Europe stopped at just over 1%, with a further slowdown in the 2000s.
The result is that much of the convergence built in the post-war period has dissolved.
Three prominent economists – Luis Garicano of the London School of Economics, Bengt Holmström of MIT (Nobel Prize in 2016), and Nicolas Petit of the European University Institute – attribute this decline to a cultural and institutional shift.
According to them, Europe has progressively replaced the spirit of openness and experimentation that had characterized reconstruction with an increasingly administrative and defensive attitude.
The accumulation of rules, procedures, and constraints is said to have reduced the willingness to take risks, hindered innovation, and weakened the ability to compete with more dynamic economies.
In their appeal, the three scholars call on the European Union to recover the mindset that had made the post-war economic miracle possible.
They propose creating an environment more favourable to growth: simple and predictable rules, markets truly open to competition, and a bureaucratic apparatus that supports private initiative instead of suffocating it. Only in this way, they argue, will Europe be able to return to being a driver of innovation rather than a region that merely tries to catch up with others.
Clarissa Van Vuuren
Honorary President
