William Nordhaus and Paul Romer win Nobel Economics Prize

Clay Curtis
October 10, 2018

Nordhaus shared the prize with Paul Romer, professor of economics at New York University's Leonard N. Stern School of Business.

Yale University Professor William Nordhaus, one of the 2018 winners of the Nobel Prize in economics, listens to other speakers before commenting about the honor Monday, Oct. 8, 2018, in New Haven, Conn. Nordhaus was named for integrating climate change into long term macroeconomic analysis.

Nordhaus, a Yale University professor known for his research on the economic consequences of global warming, bears two of the typical characteristics of a Nobel economics laureate: he's a man, and he's American, like 70 percent of previous prizewinners. In the 1990s, he created a model describing how the economy and the climate affect each other on the global stage, according to the Academy.

A noteworthy example is his Dynamic Integrated Climate-Economy Model, which provides a consistent framework for using knowledge borne from economics, ecology and the earth sciences.

"The old Adam Smith supply and demand theories were expanded by his view on technology and it had a lot to do to explain the growth we've had in the last 25 years in the world", said Roy Romer.

"I hope the prize will help people see humans are capable of unbelievable accomplishments when we try to do something".

Instead, by agreeing on a global price for burning carbon that reflects its whole cost, this primary cause of rising temperatures could be traded and taxed, putting market forces to work on the problem.

The jury said that while Nordhaus and Romer "do not deliver conclusive answers. their findings have brought us considerably closer to answering the question of how we can achieve sustained and sustainable global economic growth". He has served on several committees of the National Academy of Sciences on topics including climate change, environmental accounting, risk and the role of the tax system in climate change.

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Nordhaus argued a tax on carbon - say US$25 a ton - or a cap and trade scheme that allows companies to exchange pollution credits - offers the best and most economically efficient way of putting a value on that public good and thus doing something about the problem. This is important because it demonstrates to governments and policymakers that sustainable growth is achievable by directing resources and investment internally towards drivers of technological innovation, such as education and research.

Romer's research paved the way for endogenous growth theory, the academy said. Romer was the Chief Economist of the World Bank at that time, a position he left in January this year.

Two American economists have won the 2018 Nobel Economics Prize for work on climate change and a new theory on economic growth.

The pair will share the nine million Swedish kronor (about $1.01 million or 860,000-euro) prize. The average age of the laureates is 67, and only once has the Sveriges Riksbank Prize in Economic Sciences been awarded to a woman.

The awards for medicine, physics and chemistry were announced last week as was the most highly anticipated Nobel, the peace prize.

Per Krusell, one of the panel that awarded the prize, said both men were part of the same agenda, thinking about "long-run, global" issues.

The peace prize, which was announced in Oslo on October 5, was awarded to Denis Mukwege, a gynecologist from the Democratic Republic of Congo, and Nadia Murad, an activist and victim of war crimes.

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