Economics Asked by jmbejara on June 23, 2021
I’m trying to understand more about the economic repercussions of climate change. I’m unfamiliar with the specifics of the work of William Nordhaus, but it’s been predicted in several instances that he will very likely win the economics Nobel prize in the near future* (forbes, nytimes, wsj, npr, marginal revolution). He is most famous for his work on the economics of climate change (which include some estimates of the social cost of carbon).
To clarify with question, what are the merits of William Nordhaus’ work that have won him this attention? Was he merely the first to devote serious attention towards a rigorous estimate of the social cost of carbon? Or is there more?
*Update: Nordhaus was awarded the prize in 2018, along with Paul Romer.
Bill Nordhaus has made several significant contributions to the economics of climate change. That's something of an understatement. His contributions are not just in the pricing of carbon; they but span microeconomics, macroeconomics, (econometric and other) modelling, the philosophy of economics, and the economics of innovation.
He's been one of several key figures in the development of integrated assessment modelling - see for example his paper in Science, An Optimal Transition Path for Controlling Greenhouse Gases, from 1992. Such modelling became a cornerstone of the Stern Review (through Chris Hope's PAGE model), and is a live and ongoing area of development at several major universities.
He's been a significant contributor to the discussions about how to design more meaningful measures of economic welfare, including his 1972 book chapter with James Tobin, Is Growth Obsolete: the discussions about what economic growth is, and the necessity of capturing the value of what we now call natural capital and well-being, have been core to the evaluation of the potential damage costs of anthropogenic global rapid climate change.
He's "carried out extensive research on the determinants of technological change" - the words (p38) of the International Association of Energy Economists, which awarded him their 2011 "Outstanding Contributions to The Profession Award": this work has been important in the discussions about climate change mitigation, for example with regard to induced innovation, and learning curves for decarbonisation technologies.
There's also his 1973 discussion of the allocation of energy resources, which remains pertinent to the discussion of climate change mitigation today, though the forecasts about dominant technologies turned out to be a mix of prescient and ... less prescient.
His full CV is here, and shows both the breadth and depth of his interests.
So while it's fair to say that his discussion of the application of a Pigouvian tax to greenhouse gas emissions is significant, it's just one part of a much larger body of work on the distortions caused by system boundaries that were drawn far too narrowly within neoclassical economics; and possible remedies to those distortions.
Answered by 410 gone on June 23, 2021
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