Nobels 2018

Two U.S. economists, William Nordhaus and Paul Romer, have received the 2018 Nobel Memorial Prize in Economic Sciences for their efforts to untangle the economics of climate change and technological innovations.

Nordhaus and Romer “significantly broadened the scope of economic analysis by constructing models that explain how the market economy interacts with nature and knowledge,” the Royal Swedish Academy of Sciences said in a statement announcing the awards on October 8.

Nordhaus, of Yale University, developed two computer simulations that weigh the costs and benefits of taking various steps to slow global warming. He has argued for taxes on the carbon content of fuels as an effective way to get businesses to reduce greenhouse gas emissions. The Environmental Protection Agency has used Nordhaus’ work, among others, to estimate the economic impacts of climate change.

The announcement of Nordhaus’ award came just hours after a United Nations panel on climate change released a report predicting grim future effects of climate change and calling for more vigorous action by world governments to limit warming to 1.5 degrees Celsius over preindustrial times (SN Online: 10/7/18). The new report cites Nordhaus’ work.

Romer, of New York University, expanded economic theory by arguing that government policies, such as funding for research and development, can stimulate technological advances. The presence or absence of such policies helps to explain national differences in wealth and economic growth, in Romer’s view.

Romer’s ideas about policy making and technological innovation, first published in 1990, inspired a school of research that examines how business regulations and policies lead to new ideas and economic growth.

The pair will split the 9-million-Swedish-kronor (about $1 million) award.