MIT alumnus William Nordhaus wins Nobel Prize in economic sciences

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The Swedish Riksbank said William Nordhaus and Paul Romer were being honoured for their research into two of the most "basic and pressing" economic issues of the age.

Stern professor Paul Romer has been awarded this year's prestigious Nobel Prize in Economics by the Royal Swedish Academy of Sciences for his work involving economic growth, specifically "for integrating technological innovations into long-run macroeconomic analysis".

Tipped as frontrunners for the award in recent years, the pair will share the nine million Swedish kronor (about $1.01m) prize.

While Nordhaus was cited for his work on environmental and climatic change, Romer's work focused on the economic impact of technological changes and the role of ideas in fostering economic growth.

Nordhaus, at the University of Yale in New Haven, Connecticut, is the founding father of the study of climate change economics. The metric is increasingly used when implementing climate change policies. Previous macroeconomic research had emphasized technological innovation as the primary driver of economic growth, but had not modeled how economic decisions and market conditions determine the creation of new technologies.

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The award that concludes this year's series of Nobel prizes came about seven decades after the others.

Only one woman, Elinor Ostrom, has won the prize, and Leonid Hurwicz is the oldest person to be awarded a Nobel prize.

Nordhaus has argued that climate change should be considered a "global public good", like public health and worldwide trade, and regulated accordingly, but not through a command-and-control approach.

"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", Romer told New Scientist.

Romer laid the foundation for "endogenous growth theory", which predicts economic growth based on internal factors such as investment in human capital rather than exclusively on external factors, such as bringing in more advanced equipment and technology from the outside.

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The jury said Nordhaus and Romer's findings "have brought us considerably closer to answering the question of how we can achieve sustained and sustainable global economic growth".

His 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 jury said. This includes the relationship between technology innovation and economic growth, which makes the second recipient very relevant too.

Nobel prizes were initially awarded in the fields of physics, chemistry, medicine, literature and peace.

Last year's prize went to one of the founders of behavioral economics and finance, Richard H. Thaler of Chicago University, for his work studying human bias at a time when other economists still viewed people as rational actors.

In the history of the prize there has only ever been one woman awarded as a victor.

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The chemistry prize was awarded on October 3 to Frances H. Arnold, George P. Smith and Gregory P. Winter.