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Americans win economics Nobel Prize for work on climate and growth

10 October 2018

Economist Paul Romer won the 2018 Nobel Prize in Economics on Monday.

The Nobel Prize for Economics has gone to two American economists, William D Nordhaus, who studies the interaction among nature, technology and the economy over time, and Paul M Romer, who endogenised technology into the growth model popularised by Robert Solow, in which technology functioned as an autonomous, external factor.

The prize is given to an economist who has made a substantial contribution toward the subject, with an award of 9 million Swedish kroner ($US990,000) split between the pair.

Nordhaus, a professor at Yale University, and Romer, a former World Bank chief economist now at New York University's Stern School of Business, addressed "some of our time's most basic and pressing questions about how we create long-term sustained and sustainable growth", the Royal Swedish Academy of Sciences said in a statement on Monday.

While Nordhaus' work is the most overtly concerned with combatting climate change, Romer's is also key, because we need technological innovation on our side in the fight against climate change.

Nordhaus, at the University of Yale in New Haven, Connecticut, is the founding father of the study of climate change economics.

This model integrated theories and empirical evidence across multiple fields including physics, chemistry and economics. Previous macroeconomic research had emphasized technological innovation as the primary driver of economic growth, but had not modeled how economic decisions and market conditions determine the creation of new technologies.

Take climate change, for example.

"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 founded the NYU Stern Urbanization Project a year later where he conducted applied research on the many ways that policy makers in the developing world can use the growth of cities to create economic opportunity and pursue social reform.

"The policies are lagging very, very far - miles, miles, miles - behind the science", Nordhaus, a professor at Yale University, told the Swedish Academy, referring to US President Donald Trump's withdrawal from the Paris climate accord.

Upon receving news he won the honors, Romer said global warming is a solvable problem. if we start working on reducing carbon emissions.

The Nobel Committee recognized Romer for his work on the economics of technological change.

Romer explored why some countries have enjoyed faster economic growth over the long run than others. Last year's prize went to an American, Richard Thaler of the University of Chicago, for work on how human irrationality affects economic theory. Asked to name the most important lesson from his during the interview with the Nobel Prize Committee included above, Romer answered: "What happens with technology is within our control".

Per Krusell, one of the panel that awarded the prize, said both men were part of the same agenda, thinking about "long-run, global" issues.

Americans win economics Nobel Prize for work on climate and growth