Americans William Nordhaus and Paul Romer, pioneers in adapting economic theory to take better account of environmental issues and technological progress, shared the 2018 Nobel Economics Prize on Monday.
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.
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. “(But) we can absolutely make substantial progress protecting the environment and do it without giving up the chance to sustain growth.”
Romer had 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”.
Nordhaus, of Yale University, was the first person to create a quantitative model that described the interplay between the economy and the climate. “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.
Monday’s award of the last of the 2018 Nobels also took place less than a month after the 10th anniversary of the collapse of investment bank Lehman Brothers. That triggered an economic crisis from which the world’s financial system is arguably still recovering.
“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 US-led invasion of Iraq predicted that costs for a war would reach as high as $2 trillion. — Reuters
About the winners
Paul Romer, 62, a former World Bank chief economist, is now at New York University’s Stern School of Business. He had shown how economic forces govern the willingness of firms to produce new ideas, laying the foundations for a development model “endogenous growth theory”
William Nordhaus, 77, is a professor at Yale University. He was the first person to create a quantitative model that described the interplay between the economy and the climate. He was specifically honoured for “integrating climate change into long-run macroeconomic analysis”
‘Green growth’ models
The economists have constructed ‘green growth’ models that show how innovation and climate policies can be integrated with economic growth
Working independently, they have addressed “some of our time’s most basic and pressing questions about how we create long-term sustained and sustainable growth”
Their findings have broadened the scope of economic analysis
