The 2018 Nobel Prize season concluded with the announcement of the prize in Economic Sciences this morning - a prize that was not an original prize envisioned by Alfred Nobel but has long been associated with the other “Nobel Prizes”. This year’s prize goes to William D. Nordhaus and Paul M. Romer for adding how the market interacts with climate change (Nordhaus) and technology (Romer) into macroeconomic models. Paul Romer was a professor in the University of California, Berkeley economics department from 1990 to 1996; this makes him the 3rd 2018 Nobel Laureate to be associated with Cal after former professor James P. Allison won a share of the Physiology or Medicine prize and alum Frances H. Arnold won a share of the Chemistry prize.
BREAKING NEWS: ⁰The 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— The Nobel Prize (@NobelPrize) October 8, 2018
Now at the NYU Stern School of Business, Romer recently exited as the chief economist of the World Bank over some disagreements. Romer has also spent time as professor at Rochester and Chicago before Cal and Stanford afterward.
Romer won for incorporating technological advances into economic models. His endogenous growth theory was first published in 1990, right around the time when he started his 6 year run in Berkeley. His theory apparently accounts for how economic forces can be catalysis for technological innovations. These theories have since been applied in real life policies around the world.
Both Romer and Nordhaus build upon the Solow Growth Model. In fact, Nordhaus is the 4th student of Robert Solow (Nobel Laureate in 1987) to win a Nobel Prize.
The work of the 2018 Economic Sciences laureates builds upon the Solow growth model, which received the Prize in Economic Sciences in 1987. Learn more: https://t.co/QGs9dvujK6#NobelPrize pic.twitter.com/HAYkDFgJgo— The Nobel Prize (@NobelPrize) October 8, 2018
Endogenous growth theory says that investment in previously unaccounted for in economics things such as human capital and innovation are important in these cases of long run economic growths. Similar to how Nordhaus’ work points that economic growth models need to actively add in climate change concerns, Romer’s work said that economic growth is also dependent on investment in research and developments of new technologies as well as in education (like how the government should be spending more money on educational institutions like the University of California).
Listen to Romer talks about his work below, including how both Stanford and NYU had previously accidentally released press releases about him winning the Nobel Prize.
I am sure one of our CGB resident economist may chime in better on Romer’s work (and maybe draw parallel to Cal Football strategies!).
Congratulations to Professor Romer on finally getting this honor.