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.
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.
“The policies are lagging very, very far – miles, miles, miles – behind the science and what needs to be done.”
Listen to our telephone interview with 2018 Economic Sciences laureate, William Nordhaus:https://t.co/fBtoM723Nk
— The Nobel Prize (@NobelPrize) October 8, 2018
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.
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