Paul Romer, a University of Chicago alumnus and former faculty member, was awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2018.
The Royal Swedish Academy of Sciences in presenting the award on Oct. 8 cited Romer, a professor at New York University, “for integrating technological innovation into long-run macroeconomic analysis.” Romer shared the year’s prize with Yale University’s William Nordhaus, with the Academy noting their work to create models that address the relationship between climate change and economic growth.
Romer, SB’77, PhD’83, made a point to credit Nordhaus’ earlier work, especially when asked specifically about climate change.
“I hope the prize today could help everyone see that humans are capable of amazing accomplishments when we set about trying to do something,” Romer said during a news conference with the Swedish Academy. “If we set about trying to make the policy changes that are required here, we can absolutely make substantial progress towards protecting the environment—and do it without giving up the chance to sustain growth.”
Romer is among the 91 scholars associated with the University of Chicago to receive Nobel Prizes, and among the 30 who have been honored for work in economics. Six current UChicago faculty members are Nobel laureates in economics: Profs. Richard Thaler (2017), Eugene Fama and Lars Hansen (2013), Roger Myerson (2007), James Heckman (2000) and Robert E. Lucas Jr. (1995).
“Paul Romer’s PhD thesis in economics at the University of Chicago developed the key insight for which he received the Nobel Prize: That ideas are nonrival, meaning an idea one person develops can be used by many people without encountering diminishing returns," said Robert Shimer, chair of UChicago’s Kenneth C. Griffin Department of Economics and the Alvin H. Baum Professor in Economics and the College.
“Building on that insight, Romer showed that ideas are a critical engine of economic growth,” Shimer said. “An important implication of the nonrivalry of ideas is that innovators typically cannot reap the full return to their innovative activities, which gives a role for subsidies to innovation through universities and government-subsidized research.”
Romer received a bachelor of science in mathematics and doctorate in economics from UChicago, where he also served as a professor of economics from 1988-90. The 62-year-old later taught at the University of California-Berkeley and Stanford University before joining NYU in 2011, and briefly served as chief economist at the World Bank, from which he stepped down in January.
Need for policy change
Despite long being regarded as a Nobel Prize contender, the news caught Romer off guard on Monday. “I got two phone calls this morning,” he said, “and I didn’t answer either one of them because I thought it was a spam call.”
The two newly minted Nobel winners approached similar questions from different directions. Whereas Nordhaus specifically examined the interplay between climate change and the economy, Romer’s contributions focused on technological growth.