The 2018 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel is being awarded to William D. Nordhaus for integrating climate change into long-run macroeconomic analysis and Paul M. Romer for integrating technological innovations into long-run macroeconomic analysis.
Romer demonstrates how knowledge can function as a driver of long-term economic growth. When annual economic growth of a few per cent accumulates over decades, it transforms people's lives. Previous macroeconomic research had emphasised technological innovation as the primary driver of economic growth, but had not modelled how economic decisions and market conditions determine the creation of new technologies. Paul Romer solved this problem by demonstrating how economic forces govern the willingness of firms to produce new ideas and innovations.
Nordhaus findings deal with interactions between society and nature. Nordhaus decided to work on this topic in the 1970s, as scientists had become increasingly worried about the combustion of fossil fuel resulting in a warmer climate. In the mid 1990s, he became the first person to create an integrated assessment model, i.e. a quantitative model that describes the global interplay between the economy and the climate. His model integrates theories and empirical results from physics, chemistry and economics. Nordhaus model is now widely spread and is used to simulate how the economy and the climate co-evolve. It is used to examine the consequences of climate policy interventions.
Romer demonstrates how knowledge can function as a driver of long-term economic growth. When annual economic growth of a few per cent accumulates over decades, it transforms people's lives. Previous macroeconomic research had emphasised technological innovation as the primary driver of economic growth, but had not modelled how economic decisions and market conditions determine the creation of new technologies. Paul Romer solved this problem by demonstrating how economic forces govern the willingness of firms to produce new ideas and innovations.
Nordhaus findings deal with interactions between society and nature. Nordhaus decided to work on this topic in the 1970s, as scientists had become increasingly worried about the combustion of fossil fuel resulting in a warmer climate. In the mid 1990s, he became the first person to create an integrated assessment model, i.e. a quantitative model that describes the global interplay between the economy and the climate. His model integrates theories and empirical results from physics, chemistry and economics. Nordhaus model is now widely spread and is used to simulate how the economy and the climate co-evolve. It is used to examine the consequences of climate policy interventions.
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