Thursday, 18 October, 2018

Nobel Prize in Economics: Who are William Nordhaus and Paul Romer?

Per Stromberg Goran K. Hansson and Per Krusell announce the laureates of the Nobel Prize in Economics during a press conference at the The Royal Swedish Academy of Sciences in Stockholm Sweden. The prize was divided between William D. Nordhaus and Paul Americans William D Nordhaus and Paul M Romer win 2018 Nobel Prize in Economics
Melinda Barton | 10 October, 2018, 15:31

A pair of USA economists, William Nordhaus and Paul Romer, share the 2018 Nobel Prize in Economic Sciences for integrating climate change, and technological change, into macroeconomics, which deals with the behaviour of an economy as a whole.

Nordhaus is a professor at Yale University, who is most famous for his DICE computer model, . which integrates climate and economic models. and has proved many policymakers wrong about the true impact of global warming.

Two American economists have won the 2018 Nobel Economics Prize for work on climate change and a new theory on economic growth.

Romer shares this year's Nobel victory with William Nordhaus of Yale University, one of those who had also been tipped for the prize in 2016. A total of 81 laureates have been named over the prize's 50 year history.

Unlike the other Nobel prizes which were created in Swedish inventor and philanthropist Alfred Nobel's last will and testament and first awarded in 1901, the economics prize was created by the Swedish central bank, the Riksbank, in 1968 to mark its tricentenary. He was awarded the most coveted award in his field, on the same day the United Nations released a climate report, citing Nordhaus' work.

The mainstream economic analysis of the 1970s, when Romer was a graduate student and Nordhaus was an assistant professor, was mostly dedicated to what's known as general equilibrium analysis: If consumers were to maximize their utilities, and producers were to maximize their profits, what would happen?

An assistant professor of economics at Rochester from 1982 to 1988, Romer went on to appointments at the University of Chicago, the University of California at Berkeley, and Stanford University before his appointment at NYU's Stern School of Business.

William Nordhaus model has been used to determine the economic effects of a carbon tax
William Nordhaus’ model has been used to determine the economic effects of a carbon tax

Nordhaus, 77, who has been called "the father of climate-change economics", developed models that suggest how governments can combat global warming.

The economists were praised for their research on the relationship between global warning and economic growth. Multiple Nobel Prize winners, including Nordhaus, Peter Diamond, George Akerlof, and Joseph Stiglitz, have had Solow as their principal advisor.

Winners receive their prizes from the Swedish King. Working separately from Romer, he showed that "the most efficient remedy for problems caused by greenhouse gases is a global scheme of universally imposed carbon taxes".

"It takes some collective action, some support for research, or some provision of patent protection, or a mixture of the two, and some focused energy", Romer said when reached by phone from NobelPrize.org early Monday.

One received the award for his findings on the economics of climate change.

"The old Adam Smith supply and demand theories were expanded by his view on technology and it had a lot to do to explain the growth we've had in the last 25 years in the world", said Roy Romer.

Romer warned against alarmist portrayals that it will make people feel hopeless, but emphasized, "it is time that we start doing the right things" to address the threats of climate change.