Professor William Nordhaus has been awarded the Nobel Memorial Prize in Economics Sciences 2018. The prize motivation mentions the development of the models DICE and RICE which, in an innovative way integrates economics and climate in a so called “integrated assessment model”. The models describe the interaction between economic activity and the climate. He has contributed with a lot more than what is mentioned in the prize motivation, e.g. “green accounting” from 1972 (“Is Growth Obsolete”) and a subsequent follow up (Nature’s Numbers, 1999). A very interesting essay combines the difficulty of interpreting GDP as a measure of progress with ideas on how to measure technological progress, ( Do Real-Output and Real-Wage Measures Capture Reality? The History of Lighting Suggests No). In this essay, he shows how the price of artificial light has been reduced to an insignificant fraction of what is was in 1800. This welfare improvement is very hard to properly account for in conventional GDP.
He has also estimated how much “inventors” actually receives from their ideas (see “Schumpeterian Profits in the American Economy: Theory and Measurement” ) and he early on criticized the predictions from the club of Rome model, and everything he said in the 70s about how bad these predictions will be, turned out to be true. Nordhaus receiving the price is probably somewhat controversial to some (even environmental economists), however it is gratifying that the importance of environmental economics is highlighted in this manner. Nordhaus has emphasized a basic tenet of environmental economics: the climate must be seen as a global public good and the solution to the climate issues must therefore also be global, via for instance a global tax on carbon dioxide or a global emission market.
Bengt Kriström & Runar Brännlund