“Despite these brilliant minds, conceptual modeling and empirical research subsequently published by thousands of economists enthused by Nordhaus’ and Romer’s legacies, the global environmental crisis has worsen. The planet’s warming, pollution of the land, air and oceans, and biodiversity loss are ubiquitous in origin. Yet, the markets or innovation technologies have failed to stop the ecocide, or even minimize it. Climate science has been called a hoax and regulations pro nature protection are being ignored or dismantled.”
By Guillermo Paz-y-Miño-C
This year’s Nobel Prize in economics has been awarded to American professors William D. Nordhaus (Yale University) and Paul M. Romer (New York University Stern School of Business) for the integration of “climate change” and “technological innovations” into long-run macroeconomic analyses, respectively.
The Royal Swedish Academy of Sciences, which has granted the “Sveriges Riksbank Prize in Economic Sciences” —the official name— since 1969, highlights that Nordhaus and Romer developed the methods to understand a problem of global relevance: how the economy interacts with nature (exemplified by climate change) and with human knowledge (the ideas and innovations generated to solve problems).
It has long been known to scholars that nature imposes limitations on the economy. At the same time, innovation or “ideas” determine how societies undertake challenges. In the 1990s, Nordhaus introduced the factor “climate” into economic projections. He came up with “DICE,” a Dynamic Integrated Model of Climate and the Economy (watch VIDEO) in which three subcomponents interacted: traditional economic growth theory (markets that produce goods using capital and labor, with natural resources as energy inputs), the carbon cycle (particularly carbon dioxide emissions to the atmosphere derived from burning fossil fuels), and climate (the damage to nature resulting from the accumulation of greenhouse gases).
Separately, and during the 1980s, Romer had observed that technological development correlated with economic prosperity. He asked simple, yet fundamental questions: Where did ideas for new technologies come from? What kind of a product was an idea? Romer proposed that ideas by inventors, engineers or scientists emerged “endogenously” in the marketplace via “rivalry and excludability.” For example, access to inventions like a computer software, a secret soft drink recipe or a coded satellite TV-broadcast could be restricted by encryption (the software or satellite signal) or patent laws (the ownership of the soda formula). For Romer, rivalry and excludability of ideas were central to growth because the latter depended on innovation.
Neither Nordhaus nor Romer offered definitive answers to the challenges of extracting resources from nature with low environmental impact or generating the right amount of knowledge —innovation technologies— to manage such resources to generate sustained and sustainable long-term affluence. In fact, the Committee for the Prize in Economic Sciences noted that the recognition to the researchers was for addressing difficult questions about the economy and providing the conceptual and numerical tools to studying and modeling them.
Nonetheless, based on Nordhaus’ work, corrective measures were suggested to carbon and greenhouse-gases emissions, including carbon taxes on countries. A tactic also rooted in a 1920s notion —in England— that polluters should pay for the damage they caused to society by their polluting practices. A more modern assumption derived from Nordhaus’ research has been that if carbon emissions are limited by law and a high price is set to carbon pollution (by global emissions trading systems), then, minimization of pollution is possible.
Romer’s modeling, on the other hand, later showed that different from the economic growth driven by the accumulation of physical capital (the traditional view), prosperity motivated primarily by the accumulation of ideas did not inevitably experience decreasing returns. He alerted that although unregulated markets will produce technological change, they will tend to underprovide research and development (R&D) and the very goods that R&D could create. To secure global long-run growth, Romer suggested that governments ought to intervene via regulations (patents) and subsidies and incentives to innovation (research). The laws should limit —in time and space— the monopoly rights to goods and balance them with encouragement to creativity.
Despite these brilliant minds, conceptual modeling and empirical research subsequently published by thousands of economists enthused by Nordhaus’ and Romer’s legacies (1980s onwards), the global environmental crisis has worsen (see IPCC October 7, 2018, report). The planet’s warming, pollution of the land, air and oceans, and biodiversity loss are ubiquitous in origin. Yet, the markets or innovation technologies have failed to stop the ecocide, or even minimize it. Climate science has been called a hoax and regulations pro nature protection are being ignored or dismantled in various countries (see reports on the United States A and B).
One would expect that a Nobel Prize granted to our scientists might reignite public commitment to honor academic work and support it; or realize that wealth and prosperity will vanish without competitive research. But there is a campaign out there to delegitimize science, and it is growing strong in respect to climate. — EvoLiteracy © 2018.
This op-piece appeared in The Standard Times (South Coast Today), see HERE.