The 2018 Nobel Prize in Economic Sciences was granted to Americans William Nordhaus and Paul Romer. Both researchers have found in their respective fields methods to address sustainability along with economic growth needs, including data on climate change and innovations.
The prize was announced by professor Göran K. Hansson, secretary general at the Royal Swedish Academy of Sciences, in the beginning of October. Professor Per Krusell, a Member of the Prize Committee for Economic Sciences explained that, “when you open an economy book, you often find something about business cycles and short-term oscillations, like unemployment and low or high inflation.”
“With macroeconomics is different. It’s about where economic growth comes from. Paul Romer tries to understand why some countries develop and others don’t, why the world is growing at the current pace and what explains technology progress. Romer explains what the preconditions for a healthy economic growth are.”
According to the Royal Academy of Sciences, Nordhaus, at Yale University, was awarded for “for integrating climate change into long-run macroeconomic analysis.” Romer, at the New York University School of Business (NYU), for “integrating technological innovations into long-run macroeconomic analysis.”
“I think that what Nordhaus did was to pay attention to other sciences. This is trendy today, but in the 70’s, it wasn’t usual for economic sciences to dive deep into natural sciences,” said Krusell.
The Academy’s official statement also emphasizes that “at its heart, economics deals with the management of scarce resources. Nature dictates the main constraints on economic growth and our knowledge determines how well we deal with these constraints”.
This year’s Laureates were appointed for “having significantly broadened the scope of economic analysis by constructing models that explain how the market economy interacts with nature and knowledge.”
Meet the Laureates
Both researchers’ works revolve around the balance between nations’ collective needs and society financial flow, on top of the ever-increasing urgent need of calculating environmental impacts, due to our decisions, that reverberate for decades.
Paul Romer is an economist, entrepreneur, politician and director of the Marron Institute of Urban Management. Romer’s collaboration shows that knowledge may work as a long-run driver of economic growth.
Romer’s solution, published in 1990, are the grounds of what we call today Endogenous Growth Theory. He explains how ideas are different from other assets and require specific conditions to prosper in a given market.
The researcher shows how economic forces govern companies’ disposition to generate new ideas and innovations. Romer’s theory produced a large number of new researches on regulations and policies that encourage new practices to generate and cultivate prosperity.
William Nordhaus findings address interactions between society and nature. Nordhaus decided to work on sustainability in the 70’s, when he noticed scientists’ growing concern regarding civilization’s dependence on fossil fuels resulting in global warming.
In the mid 90’s, he became the first person to create an integrated assessment model, a quantitative system that depicts global interaction between economy and climate. His model integrates physics, chemistry and economy’s empirical results and theories.
The Nordhaus model is broadly spread and used to simulate how economy and climate coevolve. It is also used to assess the consequences of climate policy interventions, such as creation of taxes on carbon.
Get to know Braskem’s positioning on Circular Economy in full: http://www.braskem.com/circulareconomy
Content published in November 13, 2018