Economists Nordhaus, Romer awarded 2018 Nobel prize

William Nordhaus left on screen and Paul Romer share the 2018 Nobel Memorial Prize in Economic Sciences

William Nordhaus left on screen and Paul Romer share the 2018 Nobel Memorial Prize in Economic Sciences

Americans William Nordhaus and Paul Romer, pioneers in adapting the western economic growth model to focus on environmental issues and sharing the benefits of technology, won the 2018 Nobel Economics Prize on Monday.

According to the Nobel Prize Committee in Stockholm, the recipients came up with methodological insights into the causes and consequences of technological innovation and climate change.

In awarding the prize to Paul Romer, the Swedish Academy cited his contributions "for integrating technological innovations into long-run macroeconomic analysis". Carbon dioxide, which is emitted when fossil fuels are burned, is a heat-trapping "greenhouse gas" blamed for global warming, and a tax would make polluters pay for the costs imposed on society. "But I'm extremely confident it will happen".

In the 1970s, Nordhaus, already alarmed by the threat of global warming, began working on potential solutions.

"Nordhaus and Paul M. Romer have designed methods for addressing some of our time's most basic and pressing questions about how we create long-term sustained and sustainable economic growth", the academy said in a news release.

The applications of the model for the carbon tax has been criticized for several reasons, though.

The notion of taxing polluters rather than imposing government edicts to cut emissions is based on the premise it would prompt companies to devise new ways of curbing pollution. "They want to deny it exists", Romer said. Versions of a carbon tax have been used in Europe but have yet to be adopted in the United States.

The Nobel economics prize wraps up the 2018 awards season, notable this year for the lack of a literature prize, postponed by a year for the first time in 70 years over a rape scandal that came to light as part of the #MeToo movement.

Many economists have since endorsed the concept of taxing carbon and using this financial lever to influence societal behaviour.

"They have taken macroeconomics to a global scale, to tackle some of the world's biggest problems", said the Nobel Prize committee.

Romer's career has taken him outside the academic world. Government policies, he found, are vital. Examples include subsidies for research and development and patent policies that strike a balance between allowing inventors to profit from their ideas and allowing others to put the innovations to work. This explains how ideas are different from other physical goods and require certain conditions to thrive in a market.

Officially known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, the economics prize is traditionally the final award of the Nobels to be announced each year.

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