Who are Nobel Prize winners William Nordhaus and Paul Romer?

8 Oct 2018

Still from ‘William Nordhaus: The Economics of Climate Change’. Image: Becker Friedman Institute at UChicago – BFI/YouTube

This year’s Nobel Prize in Economics has gone to William D Nordhaus and Paul M Romer, leaders in climate change policy and technological growth.

The Royal Swedish Academy of Sciences has named Americans William D Nordhaus and Paul M Romer as the joint winners of this year’s Nobel Prize for Economic Science, the former’s announcement being particularly timely.

Revealing the reason for its choice, the academy said it was because the two are icons when it comes to “integrating technological innovations into long-run macroeconomic analysis”. Both laureates helped significantly broaden the scope of economic analysis, it added, by constructing models that explain how the market economy interacts with nature and knowledge.

Good timing

The awarding of half of the prize to Nordhaus could not have come at a more appropriate time, as his work was instrumental in our understanding of how climate change would affect us in the years and decades to come.

While we are now coming to terms with catastrophic climate change 12 years from now, Yale University’s Nordhaus began working on the topic in the 1970s as fears grew surrounding the contribution of fossil fuels to a warmer climate.

In the mid-1990s, he created the first ‘integrated assessment model’, this being a quantitative model that describes the global interplay between the economy and the climate.

This model integrated theories and empirical evidence across multiple fields including physics, chemistry and economics. It is now widely used to simulate how the economy and the climate co-evolve, especially when it comes to calculating carbon taxes.

Speaking after the news was announced, Nordhaus admitted he was critical of existing climate policies. “The policies are lagging very, very far – miles, miles, miles – behind the science and what needs to be done.”

Guiding governmental policies

Meanwhile, Romer – currently a professor at New York University’s Stern School of Business – was credited by the academy for demonstrating how governments could boost economic growth through technological development.

Prior to his work, macroeconomic research emphasised technological innovation as the primary driver of economic growth, but had not modelled how economic decisions and market conditions determine the creation of new technologies.

Romer, however, solved this problem by demonstrating how economic forces govern the willingness of firms to produce new ideas and innovations. Published in 1990, his solution laid the foundation for what is now called ‘endogenous growth theory’, generating vast amounts of new research into the regulations and policies that encourage new ideas and long-term prosperity.

Colm Gorey was a senior journalist with Silicon Republic