Nobel prize in economics won by Nordhaus and Romer for work on climate change and growth - as it happened
The Sveriges Riksbank Prize in Economic Sciences has been awarded to two American men for work on climate change and sustainable growth
- BREAKING: Nobel Prize awarded to Nordhaus and Romer
- Why they won
- The official announcement
- Romer: Climate change crisis can be fixed, if we work at it
Earlier:
2.01pm BST
And finally, here's our news story on today's Nobel prize in economics.
Related: US economists win Nobel prize for work on climate and growth
1.58pm BST
Former UK prime minister Gordon Brown may have smiled at Romer's success.
Back in the 1990s, Labour's Brown gave a famous speech on "Post Neo-classical Endogenous Growth Theory". It was cowritten with Ed Balls, then his youngish assistant (later shadow chancellor, then Strictly Come Dancing star).
Related: Gordon Brown's Ode to Post Neo-classical Endogenous Growth Theory
Also Brits with long memories may recall Gordon Brown being sneered at when he gave a speech as shadow chancellor mentioning endogenous growth theory. That's the thing that earned Paul Romer the Nobel, since you ask. https://t.co/CCFQ4A1EUf
1.47pm BST
Paul Romer's success comes nine months after he quit the World Bank, where he was chief economist, under a dark cloud.
Romer had clashed with World Bank staff on several issues, including the worthiness of the methodology used in its reports. At one point, he demanded they use the word 'and' less frequently, saying it was a lever to get political points across.
The word "and" appears 493 times in the 17,000-word essay explaining the Economics Nobel Prize - or 2.9%. Laureate Paul Romer told staff at the World Bank he would not publish their reports if the proportion exceeded 2.6%.https://t.co/o9ExNnck9U
1.40pm BST
PSA: If you're a world expert, and your phone rings early one October morning, try picking up the receiver....
Paul Romer tells me he didn't answer the phone when it rang early this morning. He figured it was spam. Then he checked caller ID and saw it was from Sweden. So he called back and, after waiting on hold, learned he'd won the Nobel Prize.
1.30pm BST
Here's a clip of Paul Romer talking about his award, and the work behind it.
"My work teaches us that what happens with technology is under our control."
This year's Economic Sciences laureate Paul Romer reminds us that technology doesn't just happen to us like the weather. It is a tool we can control.
Full telephone interview:https://t.co/dRjPym4OuL
1.15pm BST
Economics professor Tyler Cowen is doing a great job collating information about the winners, and explaining their work is influential and important.
Here's a flavour of his work on William Nordhaus:
Nordhaus is professor at Yale, and most of all he is known for his work on climate change models, and his connection to various concepts of "green accounting." To the best of my knowledge, Nordhaus started working on green accounting in 1972, when he published with James Tobin (also a Laureate) "Is Growth Obsolete?", which raised the key question of sustainability. Green accounting attempts to outline how environmental degradation can be measured against economic growth. This endeavor is not so easy, however, as environmental damage can be hard to measure and furthermore gdp is a "flow" and the environment is (often, not always) best thought of as a "stock."
Nordhaus developed (with co-authors) the Dynamic Integrated Climate-Economy Model, a pioneering effort to develop a general approach to estimating the costs of climate change. Subsequent efforts, such as the London IPCC group, have built directly on Nordhaus's work in this area. The EPA still uses a variant of this model. The model was based on earlier work by Nordhaus himself in the 1970s, and he refined it over time in a series of books and articles, culminating in several books in the 1990s. Here is his well-cited piece, with Mendelsohn and Shaw, on how climate change will affect global agriculture.
My growing and under-revision take on why William Nordhaus won the Nobel Prize in economics: https://t.co/QTI73TD5Yr
Romer has been a central figure behind the notion of "charter cities," namely an economic region but with external or possibly foreign governance, so as to enforce the rule of law and spur economic growth. The charter cities idea comes rather naturally out of Romer's work on the economics of growth. Think of Romer as asking "which is the non-rival public good which can be extended at very low cost?", and wondering if that might be law. Here is his famous TED talk on charter cities. Here is an interview with Romer on charter cities. He was originally slated to work with the Honduran government on charter cities, though he dropped out of the project in 2012. Here is Paul's account of what happened.
Amihai Glazer and I once wrote a comment on Romer, on his article with Barro on ski-lift pricing, which Glazer and I saw as closely connected to Buchanan's theory of clubs. Romer later credited this comment with inducing him to rethink what the notion of rivalry really means in economics, and leading to his two best-known pieces on economic growth; see the David Warsh book for more detail.
My post on the economic contributions of Paul Romer, https://t.co/Ges8TvxQxT, being steadily revised too, @paulmromer
1.01pm BST
Here's a handy explanation of Paul Romer's work on endogenous growth:
12.50pm BST
Associated Press agrees that today's award is timely, as the UN calls for fresh action on climate change:
William Nordhaus in the 1990s became the first person to create a model that "describes the global interplay between the economy and the climate," the academy said. He showed that "the most efficient remedy for problems caused by greenhouse gases is a global scheme of universally imposed carbon taxes."
The prize comes just a day after an international panel of scientists issued a report detailing how Earth's weather, health and ecosystems would be in better shape if the world's leaders could somehow limit future human-caused warming to just 0.9 degrees Fahrenheit (a half degree Celsius) from now, instead of the globally agreed-upon goal of 1.8 degrees F (1 degree C)
12.35pm BST
Harvard economist Gernot Wagner says that both winners have made huge strides towards tackling climate change.
Nordhaus's pioneering cost-benefit models for global warming, and Romer's work on how well-regulated markets can spur technological development and sustainable economic progress, and ultimately faster growth.
Perfect timing to have Bill Nordhaus win the @NobelPrize the day the 1.5C @IPCC_CH report comes out. But the same goes for @PaulMRomer winning with Bill. Lemme explain... https://t.co/mtt5AEmxga
First off, IPCC says there are dire consequences of moving beyond 1.5C, and difference to 2C, or even 3C, 4C or higher matters. All of this matters. pic.twitter.com/xlpO0IS6RK
Even before his DICE model (first published in 1992 in Science), Bill helped put the costs of climate change on economists' minds.
How does @PaulMRomer fit in here? Look at the very first graph in the IPCC report summary, bottom left panel: to limit global warming to anything near 1.5C requires massive decarbonization. That takes massive innovation, Paul's specialty. pic.twitter.com/3TsnzVWlAQ
Understanding how one integrates "technological innovations into long-run macroeconomic analysis" is at the core of turning the climate ship around.
12.05pm BST
Paul Romer's website is creaking under the strain!
FYI, the little cloud server that is running my blog is having trouble keeping up with the load. It is working for me. If you get a 404, you might want to try again in a few minutes.
12.00pm BST
The Nobel Prize committee have created a 'Popular Science' backgrounder, for anyone trying to get up to speed on today's winners.
It explains how Bill Nordhaus and Paul Romer developed tools to show how market economy affects nature and knowledge, dating back several decades.
Nordhaus became the first person to design simple, but dynamic and quantitative models of the global economic-climate system, now called integrated assessment models (IAMs).
His tools allow us to simulate how the economy and climate would co-evolve in the future under alternative assumptions about the workings of nature and the market economy, including relevant policies. His models address questions about the desirability of different global scenarios and specific policy interventions.
Laureate William Nordhaus' research shows that the most efficient remedy for problems caused by greenhouse gas emissions is a global scheme of carbon taxes uniformly imposed on all countries. The diagram shows CO2 emissions for four climate policies according to his simulations. pic.twitter.com/tmxUE6MiLn
Romer showed that unregulated markets will produce technological change, but tend to underprovide R&D and the new goods created by it. Addressing this under-provision requires well-designed government interventions, such as R&D subsidies and patent regulation. His analysis says that such policies are vital to long-run growth, not just within a country but globally.
Romer's research laid the foundation of what is now called endogenous growth theory. The theory has generated vast amounts of new research into the regulations and policies that encourage new ideas and long-term prosperity. #NobelPrize
11.56am BST
Nobel laureate Paul Romer has been tweeting.
He's flagged up an article explaining why he is optimistic that climate change can be tackled, with firm action.
The practical insight is that there are two very different types of optimism. Complacent optimism is the feeling of a child waiting for presents. Conditional optimism is the feeling of a child who is thinking about building a treehouse. "If I get some wood and nails and persuade some other kids to help do the work, we can end up with something really cool."
What the theory of endogenous technological progress supports is conditional optimism, not complacent optimism. Instead of suggesting that we can relax because policy choices don't matter, it suggests to the contrary that policy choices are even more important than traditional theory suggests.
A post from July 2016 that bears on the announcement today by The Nobel Prize committee:https://t.co/vP1WWPVZ4x
A rough guide to the doubling time for any rate of growth is to divide it into 70. For example, if something grows at 7% per year, you can infer that it doubles every 10 years because 70 / 7 = 10. If it grows at 3.5% per year, it takes 20 years to double. Taking twice as long to double may not sound so bad, but remember the difference between using just the white squares or all the squares on the chessboard. Or consider what happens over the course of a century. A doubling time of 20 years means doubling 5 times in a century, which produces an increase by a factor of 32. Doubling 10 times produces an increase by a factor of 1024.
For some background on my work on economic growth, this post might also be helpful:https://t.co/dUaOk41JSp
11.52am BST
David Pendelbury, scientific manager at Clarivate Analytics (who draw up the list of Nobel frontrunners based on academic citations), agrees that these are worthy winners:
"It is a crowning achievement for William D. Nordhaus, Sterling Professor of Economics, Yale University, New Haven, CT, USA, and Paul Michael Romer, New York University Stern School of Business, and Hoover Institution, Stanford, California, to be recognized by 2018 Nobel Prize in Economics.
We named both as Citation Laureates in 2009 and 2005 respectively, due to an exceptionally high level of citations to their works by the research community.
11.43am BST
"It is entirely possible for humans to produce less carbon... Once we start to try to reduce carbon emissions, we'll be surprised that it wasn't as hard as we anticipated," says Paul Romer at the press conference announcing his Prize in Economic Sciences. #NobelPrize
11.33am BST
Professor Justin Wolfers of the University of Michigan says Romer and Nordhaus are worthy winners, for asking the 'big questions' about economics and the world we live in.
Nobel Prize goes to the great Bill Nordhaus -- the founder of modern environmental economics, joint with Paul Romer, who founded the modern innovation-driven approach to understanding economic growth.
Both Bill and Paul have long been tipped to one day win the Nobel. So this will be a popular prize among his fellow economists. The timing of Nordhaus' prize -- coming as the IPCC says that action to warns us that action is necessary -- is perfect.
At one level, this prize doesn't seem like an obvious combination -- both are somewhat related to modern growth theory, but not in any particularly coordinated or similar fashion.
But the Nordhaus-Romer pairing makes sense, because they each point to contradictions at the heart of capitalism. It's all about market failure. Left alone, markets will generate too much pollution (Nordhaus) and too few ideas (Romer).
The common thread is that smart government policies -- that tame, harness and direct economic forces -- are essential if the economy is to deliver good outcomes in the long run. These are important ideas which are used every day in modern policy debates.
Paul and Bill are both Americans, and use the modern formal toolkit. Each has spent their careers starting with abstract economic ideas based on difficult greek letters, and working out their practical implications for policy.
This is, for sure, a Nobel Prize about the big questions. For Nordhaus, it's about asking how can we grow the economy without destroying our planet? And for Romer, it's about asking what's in the engine room that drives economic growth, and how can we keep it going?
Both Bill and Paul are also superb economic educators. Nordhaus came on as a coauthor of the most important economic textbook ever written (Samuelson's "Economics" because Nordhaus & Samuelson), and Romer founded Aplia, which was the first big shove moving econ education online.
11.29am BST
Reaction is starting to flood in.
Oxford University researcher Max Roser says Nordhaus and Romer are a great choice:
Two researchers who dedicated their lives to study the big transitions in human history by taking a very long run view on how we got to now and where we are heading. Congratulations to both of them.
Paul Romer told me it was a chart that got him into studying economics.
He looked at this line and wondered how something like this is possible. Today, decades later, he wins the Nobel Prize for contributing to the answer on how it is possible.
[source https://t.co/RDdsXbMz4j] pic.twitter.com/xmI27hdyZJ
11.25am BST
You probably wouldn't put William Nordhaus's climate change work in the same boat as Paul Romer's work on heathy, sustainable economic growth.
But the committee at the Royal Swedish Academy of Sciences insist that these two macroeconomists have more in common than first appears.
11.21am BST
Q: Did you expect to win the award?
Apparently not! Paul Romer reveals that he ignored two phone calls today because he assumed they were spam calls. Fortunately the committee got through in the end....
11.17am BST
Paul Romer adds that optimism is a vital ingredient to tackling hard problems such as climate change.
"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.
Humans are capable of amazing accomplishments if we set our minds to it.
11.16am BST
Paul Romer is on the phone now, sounding understandably bouncy.
Asked about the IPCC's warning on climate change, Romer says that the world can fix the problem, if we start now.
Once we start to try to reduce carbon emissions, we'll be surprised that it wasn't as hard as we anticipated.
The danger with very alarming forecasts is that it will make people feel apathetic and hopeless.
11.10am BST
The Royal Swedish Academy of Sciences has decided to award the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2018 to
William D. Nordhaus, Yale University, New Haven, USA
11.07am BST
Nordhaus and Romer feel like worthy winners.
As mentioned earlier, William Nordhaus has been a pioneer on the vital issue of climate change - using models to show that policymakers are failing to measure the true impact of global warming.
"integrates in an end-to-end fashion the economics, carbon cycle, climate science, and impacts in a highly aggregated model that allows a weighing of the costs and benefits of taking steps to slow greenhouse warming.
BREAKING NEWS: aThe Royal Swedish Academy of Sciences has decided to award the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2018 to William D. Nordhaus and Paul M. Romer. #NobelPrize pic.twitter.com/xUs6iSyI7h
11.00am BST
Once again, none of the world's leading female economists have been recognised.
Commiserations to Esther Duflo, Anne Osborn Krueger, Claudia Goldin, Janet Currie, et al, and good luck for next year.
10.56am BST
William Nordhaus is being recognised for his work on the damage caused by climate change.
Paul Romer has examined how economists can achieve a healthy rate of economic growth.
10.54am BST
William Nordhaus and Paul Romer, awarded the 2018 Prize in Economic Sciences, have designed methods that address some of our time's most fundamental and pressing issues: long-term sustainable growth in the global economy and the welfare of the world's population. #NobelPrize pic.twitter.com/8WccazjrBb
10.53am BST
The winners are William Nordhaus for his work on climate economics, and Paul Romer for his work on the endogenous growth theory.
10.51am BST
Today's prize is be awarded for innovation, climate and economic growth......
10.50am BST
Here we go....
10.48am BST
Usually the committee try to contact the winner (s) before the official announcement, so maybe they're struggling to get through.
This can be a problem if the prize is going to someone in America, for example, where it's still rather early (approaching 3am in California).
10.44am BST
Sounds like there's a small delay....
10.41am BST
The live feed is now working, so you can hear the scraping of chairs and nervous coughing in the Royal Swedish Academy.
10.34am BST
Here are some facts about today's prize:
10.32am BST
Tension is rising in Stockholm as journalists await the news....
The press room is filling up at the Royal Swedish Academy ahead of the economics #NobelPrize announcement. Lots of different languages being spoken too pic.twitter.com/MESCgZ5pqx
10.28am BST
As well as the glory, today's winner will also receive a financial windfall of 9 million Swedish kronor. That's roughly 750,000, or $1m.
If there are two or three laureates, they share the cash.
10.15am BST
Just half an hour to go...
Who will be awarded this year's Prize in Economic Sciences?
We'll be breaking the news at 11:45am (CEST). Join the discussion - use the hashtag: #NobelPrize
Photo: Alexander Mahmoud pic.twitter.com/RKrOt11Gzz
9.57am BST
Those of us who propped up the bottom of the class can take heart from these words from last year's winner, Richard Thaler:
"I wasn't a great student. My thesis advisor famously said: 'We didn't expect much of him'" - Richard Thaler, 2017 Laureate in Economic Sciences.
Who will be awarded the 2018 Prize in Economic Sciences? Find out when we break the news right here tomorrow (8 October). pic.twitter.com/Ys8mipniYV
9.51am BST
This (unscientific) Twitter poll suggests Esther Duflo would be a popular choice, if they're going to double the number of female winners to two.
Just two more days until the winner of this year's Nobel prize in economics is announced!
Which one of these brilliant female economists would you award the prize to?
Swedish economist put Paul Romer as the most likely candidate. In my opinion, more timely winners would be William Nordhaus (environment) or Esther Duflo (development) https://t.co/YBFH7DOrGz
9.50am BST
Her's another prediction, from Francesco Trebbi, professor of economics at the University of British Columbia:
The Nobel Prize in Economics is next Monday. My prediction this year is Philippe Aghion, Peter Howitt, Paul Romer for endogenous growth theory. [we are still awarding the 1980s & macro/growth have been skipped for a while]
9.31am BST
US economics professor Tyler Cowen has predicted that it might be Duflo and Banerjee's year.....
But given his forecasting record is as bad as mine, that's not a given.
I've never once gotten it right, at least not for exact timing, so my apologies to anyone I pick (sorry Bill Baumol!). Nonetheless this year I am in for Esther Duflo and Abihijit Banerjee, possibly with Michael Kremer, for randomized control trials in development economics.
Maybe they are too young, as Tim Harford points out, so my back-up pick remains an environmental prize for Bill Nordhaus, Partha Dasgupta, and Marty Weitzman.
9.27am BST
Perhaps a climate economist, such as William Nordhaus, could win this year's award.
Nordhaus, a Yale University professor, has conducted key research into the economics of climate change, showing that mankind is ignoring the catastrophic cost of inaction.
9.16am BST
Shamefully, only one woman has ever won the Nobel prize for economics - Elinor Ostrom back in 2009.
Duflo and Banerjee are students of detail. Is it better to give people mosquito nets or make them pay? What is the best method of getting children into schools, and ensuring that they learn?
Should you encourage immunisation by dispatching clinics to villages or reward parents with bags of rice? Or both? Or neither?
9.06am BST
Predicting Nobel winners is a tricky task, but that's no reason not to give it a go.
Every year, researchers at Clarivate Analytics chew their way though the Web of Science citation index to calculate whose work has been cited particularly often, making them good candidates for a Nobel.
8.37am BST
Good morning. Top economists across the globe will be watching their phones nervously today, or setting their alarm clocks a little earlier than usual.
Because, around 10.45am UK time, someone's going to win the biggest prize in economics science.
#NobelPrize in economics announced today! Here's a very handy anti-troll cartoon disclaimer. Forget the format, it's the winner(s) that matters. pic.twitter.com/FjOd81cY5q
Related: Nobel prize-winning economists take disagreement to whole new level
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