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Economists William Nordhaus, Paul Romer win Nobel for work on sustainable growth

It’s ‘absolutely’ possible to better protect the environment without stifling growth, laureate says

An artist’s rendering of the 2018 Nobel laureates in the economic sciences: William Nordhaus, left, and Paul Romer, both Americans. (Niklas Elmehed/Nobel Media AB 2018)

Americans William Nordhaus and Paul Romer have won this year’s Nobel Memorial Prize in economic sciences for their work in adapting economic theory to take better account of environmental issues and technological progress.

 

In an award that turned the spotlight on the global debate over risks associated with climate change, the Royal Swedish Academy of Sciences said the laureates’ work helped answer fundamental questions on how to promote long-term sustainable growth and enhance human welfare.

Per Stroemberg, left, Goeran K. Hansson, centre, and Per Krusell announce the laureates for the final Nobel Prize of 2018 at the Royal Swedish Academy of Sciences in Stockholm on Monday. (Henrik Montgomery/TT News Agency/AFP/Getty Images)

 

The prize took Romer, of New York University’s Stern School of Business, by surprise.

“I got two phone calls this morning, and I didn’t answer either one because I thought it was some spam call, so I wasn’t expecting the prize,” he said, while welcoming the chance to expand on his theory.

“I think … many people think that protecting the environment will be so costly and so hard that they just want to ignore [this],” he told a news conference via phone link. “We can absolutely make substantial progress protecting the environment and do it without giving up the chance to sustain growth.”

‘Conclusive answers’ on sustainability

Romer has shown how economic forces govern the willingness of firms to produce new ideas and innovations, laying the foundations for a new model for development, known as endogenous growth theory.

The Nobel Prize

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Laureate William Nordhaus’ research shows that the most efficient remedy for problems caused by greenhouse gas emissions is a global scheme of carbon taxes uniformly imposed on all countries. The diagram shows CO2 emissions for four climate policies according to his simulations.

 

Nordhaus, of Yale University, was the first person to create a quantitative model that described the interplay between the economy and the climate, the Royal Swedish Academy of Sciences said on Monday.

“Their findings have significantly broadened the scope of economic analysis by constructing models that explain how the market economy interacts with nature and knowledge,” the academy said in statement.

“We overslept and when we got up, I got a nice call from my daughter,” Nordhaus told Reuters at his home in New Haven, Conn. “She said, ‘Dad, you won. It’s so nice.’ It was a really lovely call. It’s a nice way to find out.”

He said he was being honoured for his work on carbon tax as a mechanism to reduce global warming.

“It was for work on one of the most important problems the globe faces, which is climate change,” he said. “I’ve been working on that for almost 40 years, and the time’s ripe.”

The Nobel Prize

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This year’s Economic Sciences laureate Paul Romer’s research shows how the accumulation of ideas sustains long-term economic growth. He demonstrated how economic forces govern the willingness of firms to produce new ideas and innovations. pic.twitter.com/LeWDpiIHrF

Hours before the award, the United Nations panel on climate change warned of the risks of more frequent heat waves, floods and drought in some regions as well as the loss of species without a radical rethink in how societies operate.

Worth $1.31 million Cdn, the economics prize was established in 1968. It was not part of the original group of five awards set out in Swedish industrialist Alfred Nobel’s 1895 will.

“This year’s laureates do not deliver conclusive answers, but their findings have brought us considerably closer to answering the question of how we can achieve sustained and sustainable global economic growth,” the academy said.

Romer’s career has also taken him outside the academic world. While on leave from the Stern School, he served as chief economist and senior vice-president at the World Bank until early this year.

 

Nordhaus, whose research has included economic history, is also known to have authored a study that before the U.S.-led invasion of Iraq predicted that costs for a war would reach as high as $2 trillion US.

 

Unusual year for Nobels

 

The economics prize is the last of the Nobels announced this year. The prizes for medicine, physics, chemistry and peace were awarded last week.

 

This year’s awards have stood out for two reasons.

Proceedings have been overshadowed by the absence of the literature prize, postponed to give the Swedish Academy time to restore public trust after a sexual assault scandal.

Three women have been awarded Nobel prizes — an unusually large number for a single year.

With files from The Associated Press

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