Is it possible to make long-term predictions on how climate change and the economy co-evolve as a means to understand the impact climate change has on the economy? Or for that matter, in what ways governments could encourage technological innovation in order to assure the continuation of economic growth? Both William Nordhaus, awarded for his integration of climate change into economic modelling, and Paul Romer are sharing the prestigious prize due to their engagement in developing methods that can predict long-term economic forecasting. Paul Romer contributes to long-term economic forecasting by incorporating knowledge as an integral part of economic growth, thus demonstrating how understanding market conditions and economic decisions could enable the rise of new technologies.
What does it mean to integrate climate-change into economic predictions? Nordhaus has, since the 1970s, examined and explained how nature and society interact with one another. With the help of an integrated assessment models (IAMs), taking into consideration the findings from natural sciences, he exposed linkages between the economy and the climate, and how these two fields synergize. The IAMs feature three interrelating segments that reflect on carbon emission as a cause of global warming. Two of the models are engaged in looking into carbon-circulation as well as how carbon emission, in conjunction with other greenhouse gases, disturbs the energy exchange to and from Earth. The third segment reflects on how climate policies and their interventions, such as the use of carbon taxes, influence global carbon emissions and the economy.
Although the Nobel committee admits that the two economists do not provide final conclusions, they were awarded the Prize due to the fact that“… their [the Nobel Prize winners] findings have brought us considerably closer to answering the question of how we can achieve sustained and sustainable global economic growth.” Further information about the scientific background and the motivation can be found by clicking on the included links.
