10/8/2018 2018 Nobel in Economics Is Awarded to William Nordhaus and Paul Romer - The New York Times

2018 Nobel in Economics Is Awarded to William Nordhaus and Paul Romer

By Binyamin Appelbaum

Oct. 8, 2018

WASHINGTON — The 2018 Nobel Memorial Prize in Economic Science was awarded on Monday to a pair of American economists, William D. Nordhaus and Paul M. Romer, for their work highlighting the importance of government policy in fostering sustainable economic growth.

Mr. Nordhaus was honored for pioneering the assessment of the economic impact of climate change, including his advocacy for governments to tax carbon emissions. Mr. Romer was honored for his work on the role of policy in encouraging technological innovation.

Mr. Nordhaus, 77, is a professor at Yale. Mr. Romer, 62, is a professor at New York University..

The announcement of the award came on the same day that a United Nations panel on climate change released a report warning of dire consequences from climate change and urging governments to respond to the problem with greater urgency. The Nobel Prize committee said that its choice of laureates underscored the need for governments to cooperate.

“The message is that it’s needed for countries to cooperate globally to solve some of these big questions,” said Goran K. Hansson, secretary general of the Royal Swedish Academy of Sciences.

Mr. Romer said he and Mr. Nordhaus shared a sense of optimism.

https://www.nytimes.com/2018/10/08/business/economic-science-nobel-prize.html?action=click&module=In%20Other%20News&pgtype=Homepage&… 1/5 10/8/2018 2018 Nobel in Economics Is Awarded to William Nordhaus and Paul Romer - The New York Times “One problem today is that people think protecting the environment will be so costly and so hard that they want to ignore the problem and pretend it doesn’t exist,” he said at a news conference following the announcement. “Humans are capable of amazing accomplishments if we set our minds to it.”

On Monday, Mr. Romer said that he did not answer his phone when it rang in the morning, figuring it was a spam call. Then he checked caller ID and saw the call was from Sweden. So he called back and, after waiting on hold, learned that he’d won the Nobel Prize.

Mr. Nordhaus, 77, graduated from Yale and then earned a doctorate in economics from the Massachusetts Institute of Technology in 1967. That same year, he returned to Yale as a member of the economics faculty, and he has remained there ever since.

In the 1960s and the 1970s, amid rising concern about pollution, economists began to argue that taxation was the most effective solution: The government should charge people for polluting.

Mr. Nordhaus became an early advocate for the taxation of carbon emissions. He argued that the best way to limit emissions was to calculate the cost of a fixed level of emissions and then require companies or governments to pay for those costs.

The Nobel Prize committee cited Mr. Nordhaus for his work in showing that “the most efficient remedy for problems caused by greenhouse gases is a global scheme of universally imposed carbon taxes.”

Mr. Nordhaus also was honored for his role in developing a model that allows economists to analyze the costs of climate change. His work undergirds a new United Nations report on the dangers of climate change, released Monday in South Korea. The report warns that avoiding significant damage will require the international community to quickly coordinate changes in environmental regulation on a scale that has “no documented historic precedent.”

https://www.nytimes.com/2018/10/08/business/economic-science-nobel-prize.html?action=click&module=In%20Other%20News&pgtype=Homepage&… 2/5 10/8/2018 2018 Nobel in Economics Is Awarded to William Nordhaus and Paul Romer - The New York Times Mr. Romer, 62, sought to explain the role of technological advances in driving economic growth. His work was inspired by a desire to understand the remarkable acceleration in growth that began with the Industrial Revolution.

Economists had traditionally treated the arrival of new ideas as manna from heaven: obviously important but beyond the control of public policy. Mr. Romer’s big idea was to argue that policymakers could foster technological innovation, for example, by investing in research and development and by writing patent laws that provided sufficient rewards for new ideas without letting inventors permanently monopolize those rewards.

He argued that national differences in such public policies helped to explain differences in economic growth rates.

Mr. Romer said in an interview that the value of his work was in being precise about a broadly intuitive idea.

“It helps to see connections that weren’t obvious at first,” he said.

In particular, Mr. Romer’s work elucidated the value of participating in larger communities. While a given part of the world might be able to meet its own material needs, larger communities tend to produce more ideas, which can then be broadly shared.

“It isn’t just that we exchange mutton for port,” Mr. Romer said. “Probably the most important part of globalization is the sharing of knowledge, that billions of people can all pursue in parallel.”

In advocating for his ideas about growth, Mr. Romer has sometimes courted controversy, telling one interviewer in the 1990s, “I’m quite happy to offend everyone.”

In a 2015 essay, he criticized some rival growth theorists for the sin of “mathiness,” which he described as the use of math to obscure rather than clarify underlying ideas. He argued that some economists were dressing up

https://www.nytimes.com/2018/10/08/business/economic-science-nobel-prize.html?action=click&module=In%20Other%20News&pgtype=Homepage&… 3/5 10/8/2018 2018 Nobel in Economics Is Awarded to William Nordhaus and Paul Romer - The New York Times political beliefs in the language of science. “The style that I am calling mathiness lets academic politics masquerade as science,” he wrote.

In 2016, Mr. Romer was named chief economist of the World Bank, a prestigious perch for a development economist. But he resigned 15 months later, in January 2018, after suggesting the bank’s positive evaluation of Chile’s economic policies had been influenced by political considerations.

Mr. Romer is the son of Roy Romer, a former governor of Colorado. He earned a doctorate in economics from the University of Chicago in 1983, and then began his career as an academic.

This is the 50th time that the prize in economics has been awarded.

Mr. Nordhaus and Mr. Romer have long been mentioned as possible recipients of the prize, but they were not obvious candidates to be honored together.

Who won the 2017 Economics Prize? Richard H. Thaler was recognized for his pioneering work in establishing that people are predictably irrational — that they consistently behave in ways that defy economic theory. He is credited with persuading many economists to pay more attention to human behavior, and many governments to pay more attention to economics. Who else won a Nobel this year? • James P. Allison and Tasuku Honjo were awarded the Nobel Prize in Physiology or Medicine last Monday, for a discovery that the body’s immune system can be used to attack cancer cells.

• Arthur Ashkin, Gérard Mourou and Donna Strickland were awarded the Nobel Prize in Physics on Tuesday for developing tools made of light beams. Dr. Strickland is just the third woman to win the physics prize.

https://www.nytimes.com/2018/10/08/business/economic-science-nobel-prize.html?action=click&module=In%20Other%20News&pgtype=Homepage&… 4/5 10/8/2018 2018 Nobel in Economics Is Awarded to William Nordhaus and Paul Romer - The New York Times • Three scientists were awarded the Nobel Prize in Chemistry on Wednesday: Frances H. Arnold of the U.S., who received half the prize, and George P. Smith and Gregory P. Winter who shared the other half. They won for tapping the power of evolutionary biology to design molecules.

• The Congolese gynecological surgeon Denis Mukwege and the former ISIS captive Nadia Murad were awarded the Nobel Peace Prize on Friday “for their efforts to end the use of sexual violence as a weapon of war and armed conflict.”

What happened to the Nobel literature prize? The Nobel Prize in Literature has been postponed. The institution that chooses the laureate is embroiled in a scandal involving allegations of sexual misconduct, financial malpractice and repeated leaks — a crisis that led to the departure of several board members and required the intervention of the Swedish king. Two laureates might be named next year. Read about last year’s winner, Kazuo Ishiguro.

Correction: October 8, 2018 Because of an editing error, an earlier version of this article misstated, in one instance, Paul D. Romer’s age. As noted elsewhere in the article, he is 62, not 77; William D. Nordhaus is 77.

Correction: October 8, 2018 Because of an editing error, an earlier version of this article misstated, in one instance, Paul D. Romer’s age. As noted elsewhere in the article, he is, 62, not 77; William D. Nordhaus is 77.

Follow Binyamin Appelbaum on Twitter @bcappelbaum.

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