October 8, 2018 — Congratulations to Bill Nordhaus and Paul Romer on winning the ultimate prize in Economics. When I first heard, I wondered what the two have in common, beyond both doing path-breaking Nobel-worthy research. Then I remembered: they are originally from neighboring Rocky Mountain states, New Mexico and Colorado (but then went to elite New England prep schools).
Actually, I think the Nobel Committee might have had in mind a symmetric pairing, as it has occasionally done in the past:
* Myrdal and Hayek (1974) had different views on socialism;
* Lewis and Schultz (1979) differed on whether peasants optimized;
* Fama and Shiller (2013) differed on whether financial markets were rational.
How do Romer and Nordhaus fit the pattern? Whereas traditional growth theory assumed constant returns to scale, Paul developed growth theory with increasing returns to scale and Bill is the father of modern environmental economics, which can be interpreted as growth with diminishing returns to scale.
But both are amazingly varied in the range of their intellectual interests. Besides growth theory and endogenous technology, Paul also wrote on financial bubbles as looting and has been an entrepreneurial maverick in the two areas of cities and on-line learning. He also originally coined the phrase “a crisis is a terrible thing to waste.” Bill, besides the economics of global climate change (particularly DICE, a landmark Integrated Assessment Model), also pioneered the election-year theory of the business cycle, the Measure of Economic Welfare, energy economics, long-term measurement of productivity, a forecast of the cost of the war in Iraq, and much more.
Congratulations to both!
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