Economics of climate change and growth
- A re-look at 2018 Nobel Prize in economics -

Dr L Krishnamongol Singh *

It is now generally known that Nobel Prize in Economics has been awarded to the two distinguished American economists, namely (1) William D. Nordhaus (77) and Paul Romer (62) for their works on the economics of climate change and growth.

While the professional and other achievements and of the two Nobel Laureates have been well reported or published in the national papers (October 9, 2018) immediately after the 2018 Nobel Prize in Econoics were announced (on 8 October, 2018) by the Royal Swedish Academy of Sciences, it is found that the two US economists had already worked on the economics of climate change and its impacts on economic growth and development.

Thus it is interesting to note that the two economists (William D Nordhaus of Yale University, US and Paul M Romer of the Stern School of Business in New York, US) shared the 2018 Nobel Economics Prize for their work on integrating key questions on climate change and innovation with economics growth. In fact, they shared the 2018 Nobel Economics Prize for constructing "green growth" models.

As already reported in the Hindu (Tuesday, October 9, 2018 : "U.S. Economist William D Nordhaus and Paul M Romer on Monday (i.e. 8 October , 2018) shared the 2018 Nobel Economics Prize for constructing "green growth models that show how innovation and climate policies can be integrated with economic growth" However, as announced by the Royal Swedish Academy of Sciences, they have worked independently and addressed "some of our time's most basic and pressing questions about how we create long term sustained and sustainable growth".

The academy further announced that their models, both developed in the 1990s, have "significantly broadened the scope of economic analysis" and that an "unprecedented transformation of society and the world economy was (is) needed to avoid global climate chaos". The Hindu paper further reports that the policies are lagging very far behind the science and that according to professor Nordhaus of Yale University, "we are actually going backwards in the United States with the disastrous policies of the Trumph administration."

This view of Professor Nordhaus was given to Swedish Academy immediately after the prize announcement because of US President Donald trump's policy of withdrawal of US form the Paris climate accord. The reason for the withdrawal of US from the Paris climate accord is that the US needs to contribute large share to the "global climate fund" and that they cannot slow down their process of industrialisation.

Here, we may briefly touch on the acievements of about William D. Nordhaus. It is found that William D Nordhaus is one of America's eminent economists. He was born in New Mexico and received Ph.D in Economics at MIT(US).

He was a Whitney Grisworld Professor of Economics at Yale University and, as an American economist he also worked in the Cowles Foundation for Research in Economics And, Professor W. D Nordhaus is the co-author with (Late) Professor Paul A. Samuelson for the well known text book entitled "Economics" (first edition, 1948) and who (Late Professor Paul A Samuelson) was also the founder of the renowned of the MIT Graduate Department of Economics, and the first American economist who ws awarded Nobel Prize in Economics in 1970 for his work on static and dynamic economic theory.

And, he is also famous for his significant contribution to the analysis in the development of economics science including in both theories and practices. His well known theory of revealed preference for consumer behaviour finds good place in economic theory even today. He also contributed to mainstream economics concerning both theories and policies.

Here, wihout elaborating (Late) professor P.A. Samuelson, we were basically concerned with professor W.D. Nordhaus, who received his Ph.D. degree in economics from MIT founded by Professor Paul A Samuelson, who was also associated with the University of Chicago and Harvard of USA. It is interesting to note that W.D. Nordhaus who is professor of economics at Yale University of USA works in various fields of economics including the enviroment, inflation, energy, technological change, regulation, resource economics, trends in profits, productivity economic policies etc.

Professor W.D. Nordhaus has also written several books on global warming and climate change which is one of his main areas of research in economics.

Some of W.D. Nordhau's books made known to the public immediately after he was awarded Noble prize in economics along with Paual M Romer) included
(1) Managing the Global Commons : The Economics of Climate Change (1994) which won the 2006 Award for Publication of Enduring Quality from the Associaton of Environmental and Resource Economics
(2) Warming the World : Econcomic Models of Global Warming (2000), (with Josep Boyer),
(3) The Climate Casino: Risk, uncertainty and Economics for a Warming World etc.

His other contributions to economic of climate change included A question of Balance : Weighing the Options on Global Warming Policies (published by Yale University press June 24, 2008, Reflections on the Economics of Climate Change (1993). And the details of his research contributions/works, publication, etc are already given in the Prize in Economics Science 2018-Nobel Prize. Org.

Thus, it is now well known that for all his research contribution/works that combined the key issues of climate change into long-run macroeconomic analysis or for analysis of integrating climate change issues and policies with economic growth, Professor W.D. Nordhaus was awarded 2018 Nobel Prize in Economics along with Professor Paul M. Romer (62), of the Stern School of Business in New York.

And it is further interesting to note that they were awarded the 2018 Nobel Prize in Economics for their work on combining key questions surrounding climate change and innovation with economic growth (Financial Express, Kolkata October 9,2018)

It is also interesting to note that Paul M. Romer was awarded the 2018 Nobel Prize in economics for integrating technological innovations into long run macroeconomic analysis (of economic growth) In fact, W.D. Nordhaus analysis of the economics of Climate Change and Paul M. Romer's model of technological innovations were integrated into long run macroeconomic analysis of economic growth ( i.e green growth or green economic growth)though they worked seperately independently.

It is also reported that Paul Michael Romer (62 Year old), who is an American economist was a former World Bank Chief Economist. And he is now a professor of Economics at New York University (i.e. New York University's Stern School of Business) and was awarded 2018 Nobel Prize in Economics along with W.D. Nordhaus "for integrating techonological innovations into long-run macroeconomic analysis "(i.e. of economic growth).

Among other contributions to eonomic growth, he was awarded the 2018 Nobel Prize in Economics along with W.D. Nordhaus for "his work explaining the role of ideas in fostering eonomic growth" (The Telagraph, P.6) Again, the information released in the Prize in Economic Science 2018-Nobel Prize.org has revealed that Paul M. Romer is a pioneer of endogenous growth theory", and that his most important work is in the field of economic growth.

In fact, he has made vital contributions in the development of "endogenous growth theory" Here, we shall not go into details of the endogenous growth theory. However, the essence of the theory is that it provides a thoretical framework which explains the factors for endogenous growth or domestic economic growth (i.e. persistant Gross National Product growth/GNP growth or GDP growth which is dtermined by the system of production process of the economy or the domestic economy rather than forces that come from outside the system.

The endogenous growth theory also emphasied on increasing capital investment, increasing retururns to scale in economic growth, increasing public and private investments in human capital or investment in human capital development (education).According to the new theory, technological change in a country emerges as a result of public and private investments in human capital and knowledge-based industries which leads to economic growth of the country. The theory does not reject foreign private investment in knowledge-intensive industries. It encourges active role for public policy in promoting doemstic factors for economic development.

As reported in the Times of India (October 9,2018), "Romer of New York University's. Stern School of Business and and best known for his work on endogenous growth theory-a theory rooted in investment in knowledge and human capital said he had been taken by surprise by the award, but offerred a positive message". Romer emphasised that we can sustain economc growth without affecting the enviroment. Though the endogenous growth theory is basically rooted in neoclassical tradition, which mainly believes in the efficacy of the free-market, it also explains the crucial role of the government in promoting the economic growth and development. Thus, the endogenous growth model has a sharp departure from the dogma of free-market economy.

The theory further emphasises that there is the need for developing public policies for achieving rapid economic growth and development. In fact, in the new theory, there is also a sharp departure from the traditional free-market economy. However, the new theory is not based on complete state-control in economic growth. And economic growth or the growth rate is determined by the decisions of various agents of economic growth.

Thus, there is the need for increasing investments in various innovations, research and development, education for human capital formation or human development in order to increase the lifetime earnings in the process of eonomic growth and development. The government also plays an active role in promoting economic development through increasing public investments and foreign direct investment.

And the new theory also explains that all these actions and efffective public policies can promte economics growth and economic development. Thus, professor paul M. Romer's research contributions to ideas and innovaions that promote economic development shared the 2018 Nobel Prize in Economics with Professor William D. Nordhaus.

There are many other reserch contributions of the two Nobel laureates which cannot be mentioned in the present limited acticle. However, the 2018 Nobel Prize in Economics was awarded to William D Nordhaus for integrating climate change into long-run macroeconomic analysis and Paul M. Romer for integrating technological innovations into long run macroeconomic analysis (of economic growth).

Thus, both the two American economists (i.e. 2018 Nobel Laureates in Eonomics) worked to address the climate change issues and policies, create innovations and sustainable economic growth for promoting prospertiy for all.

And, as stated in the foregoing discussions, both these two American economists shared the 2018 Nobel Prize in Economics for constructing "green growth" models that show how climate change policies, ideas and innovations technological innovations can be integrated into long-run macroeconomic analysis (of economic growth) and which can also promote economic growth without environmental and climate change issues and bring prosperity or long-term sustainable prosperity for all.

Thus, the Western Economic growth models can now be applied to or adapted to the policy measures for promoting economic growth, change and development without environmental and climate change issues. And the green gowth models can also promote sustainable economic growth and address climate change and global warming issues.

In fact, in the particular context of Manipur, it is also necessary to formulate public policies and development strategies for addressing ennvironmental and climate change issues, creating new ideas and innovations for promoting sustainable green eonomic growth and green economy. Thus, it is high time that the State government takes imeediate steps for establishing a Policy Research Institution for promoting economic growth and development in the State.