Think about how the world has
changed in just a few decades. Are you old enough to remember
the world without computers everywhere? Was the weather different
in your childhood? And how do these big changes
interact with the economy? The winners of this
year’s Nobel Prize in economics, Paul Romer
and William Nordhaus, have each, in their
way, transformed how we think about
economic growth in just these ways –
Romer, by deepening our understanding of
innovation, and Nordhaus by modelling how growth
affects the climate and is affected by
the climate in turn. Before them,
economists basically explained growth as a result of
physical investment and capital accumulation. Then Romer thought deeply
about how productivity depends on ideas – how smart we are
about producing things even with a given amount
of capital and labour. And he created models of
how political and economic institutions affect how
fast our economies innovate. Nordhaus brought the science of
climate change into economics. He built the first
integrated models of how economic
activity and the climate influence one another
in complex ways. His work underpins
all the estimates of the cost of
containing climate change and the much larger
cost of doing nothing. In our lifetimes, technological
and environmental change have transformed how
our economies work. Next time you marvel about
your favourite smartphone app or worry about increasingly
extreme weather, give a thought to
Romer and Nordhaus. Thanks to them, we
are in a better place to find good policies to
deal with both innovation and climate change. Their prizes are well-deserved.

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One thought on “Nobel economics prize winners change how we think about growth”

  1. Great video. However, could you please improve on your diction? It is very difficult to hear what his saying because mumbles towards the end of every sentence.

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