The Royal Swedish Academy of Sciences announced the winners of the Nobel Economics Prize in Stockholm (Henrik MONTGOMERY)

Stockholm (AFP) – US economists William Nordhaus and Paul Romer on Monday 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.

The academy said their models, both developed in the 1990s, have “significantly broadened the scope of economic analysis”.

The prize announcement came as the UN warned in a landmark report that an “unprecedented” transformation of society and the world economy was needed to avoid global climate chaos.

It said time was running out to avert disaster, noting that our planet’s surface has already warmed one degree Celsius (1.8 degrees Fahrenheit).

“The policies are lagging very, very far — miles, miles, miles — behind the science and what needs to be done,” Nordhaus, a professor at Yale University, told the Swedish Academy, referring to US President Donald Trump’s withdrawal from the Paris climate accord.

“We are actually going backwards in the United States with the disastrous policies of the Trump administration,” the 77-year-old added. 

Romer, 62, a former World Bank chief economist now at New York University’s Stern School of Business, said 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.

He later revealed how he got two phone calls before 6.00am (1000 GMT) but didn’t answer, thinking they would be telemarketing. Seeing they were from Sweden, he called back and found out he had won.

– ‘Lose commitment to facts’ –

“What’s a little bit troubling, even though I remain very optimistic about technological possibilities, is that it seems as though we’re starting to lose our commitment to the facts,” he told a news conference in New York.

Asked how politicians could be persuaded to care about the facts in policy making, he replied: “Communicating the facts can help… We’re going to be like umpires in the fact business, we can’t go get on the playing field.”

The jury said Nordhaus and Romer’s findings “have brought us considerably closer to answering the question of how we can achieve sustained and sustainable global economic growth.”

Nordhaus was honoured for “integrating climate change into long-run macroeconomic analysis.” 

His “integrated assessment model” was created in the 1990s and combines theories and empirical results from physics, chemistry and economics.

It is now widely “used to simulate how the economy and climate co-evolve” and to examine the consequences of climate policy interventions, for example carbon taxes.

Nordhaus’s 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.

Countries refusing to take part in the scheme could be subjected to customs tariffs.

Romer won for “integrating technological innovations into long-run macroeconomic analysis”.

Complementing Nordhaus’s research, Romer laid the foundation for “endogenous growth theory”, which explains how ideas are different from other goods and require specific conditions to thrive. 

– December 10 ceremony –

His research demonstrated how economic forces govern the willingness of companies to produce new ideas and innovations.

Romer resigned from the World Bank in January 2018 after raising questions about how the institution was ranking countries.

Both winners, tipped as Nobel frontrunners in recent years, will share the nine million Swedish kronor (about $1.01 million or 860,000-euro) prize.

Last year, the honour went to US economist Richard Thaler, a co-founder of the so-called “nudge” theory.

That theory demonstrates how people can be persuaded to make decisions that leave them healthier and happier.

Unlike the other Nobel prizes, which were created in Swedish inventor and philanthropist Alfred Nobel’s will and first awarded in 1901, the economics prize was started by the Swedish central bank in 1968 to mark its tricentenary. It was first awarded in 1969.

The prize, which also consists of a diploma and a gold medal, will be presented at a ceremony in Stockholm on December 10.

The economics prize wraps up the 2018 Nobel awards season, notable this year for the lack of a literature prize.

That award was postponed by a year for the first time in 70 years over a rape scandal that came to light as part of the #MeToo movement.

The most highly anticipated Nobel, the peace prize, went to Yazidi women’s campaigner Nadia Murad and Congolese doctor Denis Mukwege for their work in fighting sexual violence in conflicts around the world.

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