STOCKHOLM • US economists William Nordhaus and Paul Romer yesterday shared the 2018 Nobel Economics Prize for constructing "green growth" models that show how innovation and climate policies can be integrated with economic growth.
Working independently, they have addressed "some of our time's most basic and pressing questions about how we create long-term sustained and sustainable growth", the Royal Swedish Academy of Sciences said in a statement.
Professor Romer, a former World Bank chief economist, is now at New York University's Stern School of Business. Professor Nordhaus is from Yale University.
The academy said their models, both developed in the 1990s, have "significantly broadened the scope of economic analysis".
Prof Nordhaus, 77, was specifically honoured for "integrating climate change into long-run macroeconomic analysis".
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.
Prof Romer won the prize for "integrating technological innovations into long-run macroeconomic analysis". The 62-year-old laid the foundation for "endogenous growth theory", which explains how ideas are different to other goods and require specific conditions to thrive.
His research demonstrates how economic forces govern the willingness of companies to produce new ideas and innovations.
The prize announcement came as the United Nations yesterday warned in a report that an "unprecedented" transformation of society and the world economy was needed to avoid global climate chaos.
Prof Romer told the Swedish academy in a live phone interview at the announcement that he was confident the world could reduce greenhouse gas emissions and still improve standards of living in the future.
"We can absolutely make substantial progress to protecting the environment, and without giving up the chance for sustained growth," he said.
The duo will share the nine million Swedish kronor (S$1.37 million) prize to be presented in Stockholm on Dec 10. The economics prize wraps up the 2018 Nobel awards season.