William D. Nordhaus of Yale University and Paul M. Romer of the Stern School of Business in New York were awarded the 2018 Nobel Prize in Economics for their work on combining key questions surrounding climate change and innovation with economic growth.
The two “have designed methods for addressing some of our time’s most basic and pressing questions about how we create long-term sustained and sustainable economic growth,” the academy said on Monday. They have “significantly broadened the scope of economic analysis by constructing models that explain how the market economy interacts with nature and knowledge,” it said.
Nordhaus, 77, began working on environmental issues in the early 1970s and has been trying to measure the economic costs of global warming ever since. To help in that effort, he constructed integrated economic and scientific computer models to determine the most efficient ways to cope with climate change.
The 62-year-old Romer, who this year stepped down from his post as chief economist at the World Bank, has argued that policy makers should stop trying to fine-tune the business cycle and instead take steps to promote new technology, which would ensure long-term growth. He has called for providing government grants to attract more students to science and engineering.
His work drew wide attention during the computer boom of the late 1990s, with some proponents suggesting it might serve as a basis for a massive government effort to underwrite technological innovations.
The academy said that the contributions of this year’s laureates “are methodological, providing us with fundamental insights into the causes and consequences of technological innovation and climate change.”
The two “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,” it said.
Last year’s prize went to one of the founders of behavioral economics and finance, Richard H. Thaler of Chicago University, for his work studying human bias at a time when other economists still viewed people as rational actors. Previous laureates have included Milton Friedman, James Tobin, Paul Krugman and Friedrich August von Hayek.
Annual prizes for achievements in physics, chemistry, medicine, peace and literature were established in the will of Alfred Nobel, the Swedish inventor of dynamite, who died in 1896. The prize in economic sciences was added by Sweden’s central bank in 1968.
The peace prize, which was announced in Oslo on Oct. 5, was awarded to Denis Mukwege, a gynecologist from the Democratic Republic of Congo, and Nadia Murad, an activist and victim of war crimes.
The chemistry prize was awarded on Oct. 3 to Frances H. Arnold, George P. Smith and Gregory P. Winter. The physics prize, announced on Oct. 2, went to Arthur Ashkin, Gerard Mourou and Donna Strickland. The award in physiology or medicine, announced Oct. 1, went to James P. Allison and Tasuku Honjo.
There was no literature prize this year after the Swedish Academy decided to take a pause following a sexual assault scandal. The economics award brings to an end this year’s Nobel prize cycle.
(Updates with more background.)
--With assistance from Niklas Magnusson, Veronica Ek and Hanna Hoikkala.
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