The Royal Swedish Academy of Sciences has decided to award the Sveriges Riksbank Prize in Economic Sciences to two American economists, William D Nordhaus, and Paul M Romer on Monday.
The award went for Nordhaus and Romer for the methods they designed in order to address one of our time’s most basic and pressing questions about how we create long-term sustained, and sustainable
economic growth, as well as tackling the global interplay between the economy, and the climate.
Romer demonstrated throughout his work, how knowledge can function as a driver of long-term economic growth. 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.
On the other hand, Nordhaus in the 1990s became the first economist to create a model that “describes the global interplay between the economy and the climate,” the academy said. His model presented the most efficient remedy for problems caused by greenhouse gases as a global scheme of universally imposed carbon taxes.
Nordhaus argued that climate change should be considered as a “global public good,” like public health and international trade, and regulated accordingly, through agreeing on a global price for burning carbon that reflects its whole cost, and this primary cause of rising temperatures could be traded and taxed, putting market forces to work on the problem.