Nobel winners show us human ingenuity can lead us away from climate change disaster

What are the limits to economic growth — and have we already recklessly exceeded them?

Such questions were raised (again) last week by (another) alarming report about climate change. Many of my environmentalist friends are convinced that economic growth itself is the fundamental problem.

It was a timely moment, then, to give a Nobel prize to two economists who have tackled that question head on. William Nordhaus and Paul Romer have tried to find ways to understand the invisible and sometimes ineffable causes and consequences of growth.

The modern world produces two things in abundance: carbon dioxide and ideas. Both swirl around, defying our attempts at control. We’d like more ideas but already have more than enough carbon dioxide. The future of humankind may depend on a strange race: can we keep living standards rising yet restrain consumption of resources and production of pollutants?

Economics being economics, Nordhaus and Romer received their prizes for technical achievements in economic modelling. Nordhaus analysed the interaction between climate change and the economy; Romer developed an elegant way to model innovation as an intrinsic part of the growth process, rather than falling from heaven. These are impressive intellectual accomplishments, but my fascination with both concerns some of their more informal work.

In one of the economics papers I truly love, Nordhaus tracked the price of illumination over the millennia, from the days when people could create light only with a campfire, through the time when they would use beef tallow — or clean, bright-burning spermaceti oil from whales — to the invention and improvement of incandescent bulbs.

Nordhaus chopped and burnt wood and tested antique lamps with a Minolta light meter. He concluded that in Babylonian times, a day’s hard work would produce enough to light a room for 10 minutes. By the end of the 20th century, the return on a day’s labour had improved from 10 minutes of light to 10 years. That is the kind of progress that gives one hope for us all.

The environmental toll paid for that light has also fallen, which is good news for the whales and good news for us.

Since the early 1960s, UK carbon dioxide emissions per person have almost halved, yet the country’s economic output per person has tripled in real terms. This is partly due to moving production abroad, but most of it is from producing more value with fewer physical resources and a lot less coal.

That is where Romer comes in. Like Nordhaus, he is impressed by our capacity to make (and then take for granted) innovative progress and argues that there is room for much more. Consider the compact, self-repairing, mobile chemical reactor powered by renewable resources that we call a “cow”. Courtesy of evolution, it is vastly more impressive than humandesigned facilities. This elegance, suggests Romer, tells us that there is plenty of room for us to do things better. While That Romer is also’true s prize-winning for the institutions that produce new ideas. work makes particular assumptions about who pays for new ideas and who benefits when they are produced, his informal writing and policy work highlight that these things cannot be taken for granted.

We should constantly be searching for better ways to do things — as Romer himself did with a successful foray into digital learning, ahead of the trend, and later with his bold and controversial push for “charter cities”, in which a country with weak institutions might outsource the governance of a greenfield city site to Canada or Norway. In particular, we should do more to encourage innovation that attacks the climate change problem.

It is conceivable that we will manage to solve the problem anyway, courtesy of dramatic progress in the cost of solar power and battery storage. If so, that will be luck we would have done very little to earn.

The most obvious first step (among several worth trying) is a stiff tax on carbon dioxide emissions. That would encourage everything from clean energy to putting on a thermal vest in the cold.

Human ingenuity is astonishing. It would be nice if policymakers tried harder to direct it towards low-carbon energy.

If policymakers matched climate change talk with action, my guess — just a guess — is that we would find that the transition to a vastly cleaner economy is smooth. I realise that my friends mean well when they demand that economic growth must stop, and soon.

However, I am pretty sure that they are wrong — and that their pessimism merely convinces others to do nothing.

HE CONCLUDED THAT IN BABYLONIAN TIMES, A DAY’S HARD WORK WOULD PRODUCE ENOUGH TO LIGHT A ROOM FOR 10 MINUTES