Work on climate, growth earns Nobel
Two Americans share prize for economic research
STOCKHOLM — The Nobel Memorial Prize in Economics was awarded Monday to one American who has studied the economics of climate change — and to another whose research on technological innovation has raised hopes that humans are creative enough to do something about it.
The Royal Swedish Academy of Sciences awarded the $1 million prize to William Nordhaus of Yale University and Paul Romer of New York University.
Nordhaus, who has been called “the father of climate-change economics,” developed models that suggest how governments can combat global warming. One key step he has en- Yale professor William Nordhaus’ research has been focused on the economics of climate change. dorsed is a universal tax on carbon, which would require polluters to pay for the costs that their emissions impose on society.
By using a tax rather than government edicts to slash emissions, the policy encourages companies to find innovative ways to reduce pollution — and their tax burden. Versions of a carbon tax have been used in Paul Romer, co-winner of the Nobel for economics, has studied the way innovation drives prosperity. Europe but have yet to be adopted in the United States.
Romer, who has studied why some economies grow faster than others, has produced research that shows how governments can advance innovation. At a news conference Monday, Romer said his research has left him optimistic that society can solve even a threat as deeply challenging as the warming of the planet.
“Many people think that dealing with protecting the environment will be so costly and so hard that they just want to ignore the problem,” Romer said. “They want to deny it exists; they can’t deal with it. I hope the prize today could help everyone see that humans are capable of amazing accomplishments when we set about trying to do something.”
As economists, Nordhaus and Romer have worked independently of each other. But to some longtime followers of the Nobel committee, the decision to collectively honor their research seemed logical.
“It’s an ingenious pairing,” said David Warsh, author of a 2007 book on Romer’s research, “Knowledge and the Wealth of Nations.”
“Nordhaus has been concerned all along with repairing the damage” to the global environment, Warsh said. “Romer has been writing about the means at your disposal” to address such a technological challenge.
Indeed, the Nobel announcement came one day after the United Nations’ scientific panel issued an urgent call for the world to take action about climate change — and explicitly cited Nordhaus’ work in asserting so. The Intergovernmental Panel on Climate Change argued Sunday that preventing an extra single degree of heat during the next few decades could make a life-or-death difference for millions of people and ecosystems on Earth.
In their separate ways, the work of Nordhaus and of Romer shares an interest in what drives economic growth and how to respond when unregulated market forces fail to deliver desired results.
In the 1970s, Nordhaus, already alarmed by the threat of global warming, began working on potential solutions. Gradually, he de- veloped models to guide policymakers in balancing the economic costs and the societal benefits of combating carbon emissions. Nordhaus concluded that the most efficient approach was the use of carbon taxes, applied uniformly.
Many economists since have endorsed the idea of taxing carbon. But adopting the regulatory frameworks on a global scale has proved problematic, and t he world’s political leaders are failing to meet it, the head of the United Nations said last month. Though many developed economies have adopted a carbon tax, the United States has not.
Far from developing policies to reduce climate change, President Donald Trump has argued that the threat of human-produced climate change is a hoax concocted by China to hurt the American economy. Many Republicans in Congress also have expressed skepticism about global warming.