Return to the right path of economic growth: Nobel Prize for climate change


Return to the right path of economic growth: Nobel Prize for climate change

The original title of this year's Nobel Prize in Economics asks the core of the future of mankind: how to solve the most fundamental and urgent problems of this era? Behind the technology and environment, there is a long-term sustainable global economic growth momentum.

Author Feng Difan

The 2018 Nobel Prize in Economics has been honored by two predictable winners: Yale Professor William D. Nordhaus and New York University Professor Paul M. Romer.

The Nobel Prize in Economics, known as the Swedish National Bank in Memory of Alfred Nobel Prize in Economics, is the highest honor in the field of world economics. At 11:45 a.m. local time on October 8, Sweden, the announcement of the prize was delayed slightly, and speculation was made that the winner might have been an American economist, who was waiting for the winner to get through to the phone at midnight in the United States.

Fortunately, staff at the Royal Swedish Academy of Sciences had at least dialed Romer's phone, and he told the Nobel Prize winner, who had missed it many times, that it was totally unexpected and that the previous two calls were harassment calls that were simply ignored.

The Royal Swedish Academy of Sciences elaborated the reason for the award: Both work was based on the Solo growth model of Robert Solow, the 1987 Nobel Prize-winning economist, in which Nordhaus won the prize for "incorporating climate change into long-term macroeconomic analysis". Romer's reason for winning the award is "integrating technological innovation into long-term macroeconomic analysis".

Qian Jun, executive dean and professor of finance at Fudan University's Panhai Institute of International Finance, told First Financial Reporter that Nordhaus won the prize because he was the first person to put environmental and climate change factors into the consideration of economic growth models in the first and most systematic way. The economic model of sexual growth has been perfected, with the focus on the effect of observing technology as the core on micro-subjects.

Nobel Prize for climate change issues

On November 8, there was another report of far-reaching significance: the United Nations Intergovernmental Panel on Climate Change (IPCC) issued a special report, Global Warming 1.5 degrees Celsius, in which the IPCC pointed out that if the global greenhouse effect continues to grow at its current rate, global warming will exceed by 2030-2052. 1.5 degrees centigrade. But this report has not sparked much splash in the global media.

After President Trump announced in June 2017 that the United States officially withdrew from the Paris Accord to tackle global climate change, the issue of climate change has fallen into a global downturn, and the Nobel Prize winners seem to want to use this award to give climate change a strong shot.

In announcing the Nobel Prize in Economics, the Royal Swedish Academy of Sciences pointed out that the main message conveyed was a global partnership to tackle climate change: it required a global solution, and every country needed to be aware of the importance of tackling the problem.

Earlier, French President Mark Long said in a keynote speech at the 73rd UN General Assembly in New York that there were no "speculative" shortcuts or simple solutions to climate disorders. Those who question reality are the same as others who bear the consequences of climate change. Extreme weather events are occurring every day.

"We foiled the plot to announce the collapse of the Paris Agreement, because even if the United States decided to withdraw from it, we could remain united." Ma Long said.

Considering the timing, it is not surprising that Nord and Moorhouse can win the prize. Qian Jun told the First Financial Correspondent that in the 1970s and 1980s, he first and most systematically considered climate change and the major changes in economic growth caused by the environment, that is, when considering economic growth, we must not ignore climate change and energy factors, that is, what we are saying today: "Economic growth cannot be seen only by speed." It depends on quality. "

Back in the 1970s, when Nordhaus, a young Yale teacher, learned about global warming and its possible causes, he felt he had to do something about developing a framework for analyzing the costs and benefits of climate change.

This is very important. Qian Jun told First Financial Reporter that once the above factors are added to the economic model, the guiding policy can be achieved, which means that quantitative analysis can be used to protect the environment, but also to develop.

Nordhaus studied the issue for about 15 years, and eventually published a short paper in 1982 that was widely recognized as the beginning of the economics of climate change / environmental economics, in which Nordhaus pointed out the reasons why climate change should be linked to economics: first, emissions reduction policies need economic decisions; second, climate change policies need economic decisions. Climate change, including extreme weather, will eventually affect the economic system.

Although the argument in this paper is now well known, it was a breakthrough enough in the 1980s, when environmental research and economic circles were not fully connected, and Nordhaus's outstanding achievement in bringing climate change into economic research was slightly greater. After that, IPCC gradually adopted its development model.

In the mid-1990s, Nordhaus became the first economist to create a quantitative model describing the interaction between the economy and climate, which developed the current mainstream tool for climate change research, the Integrated Assessment Model for Climate Change (IAM), for example, in reality, the IAM model can be tested and implemented. The consequences of carbon tax and so on. Then Nord and Moorhouse developed DICE and RICE models.

These models have made outstanding contributions to the interpretation and prediction of the game choice between countries as decision-makers in the case of carbon emissions. One of the most well-known is Nordhaus'use of the RICE model to make an academic judgment on the Copenhagen draft agreement, even if countries follow the commitments made at the Copenhagen Conference to reduce emissions, will not be able to achieve the goal of global warming within 2 degrees Celsius.

Since 2001, the IPCC has also begun to add a more micro-based economic system module to its model.

Romer finally stopped running.

Why did Romer become one of the Nobel prize winners in economics?

Wagner, an economist at Harvard University, quickly explained on Twitter that maintaining global warming at 1.5 degrees Celsius requires "massive innovation, which Romer excels at".

"The economic growth that Romer studies is one of the core issues that all economists have to study, that is, how to sustain economic growth." Qian Jun told the first financial reporter that growth is an eternal topic in economics.

Representative figures in this regard include Solo and Romer's doctoral advisor Robert Lucas.

Simply speaking, Solow model, also known as neoclassical economic growth model, exogenous economic growth model, is the economic growth model within the framework of neoclassical economics, emphasizing the scarcity of resources, emphasizing the growth limit brought by simple accumulation of material capital.

However, the model does not take into account the different environment and policy stages of enterprises, will adopt different growth patterns. Qian Jun told First Financial Reporter that Lucas and Romer's endogenous growth model pointed out that the decision-making of micro-agents should be taken into account.

Qian Jun analyzed, for example, Lucas pointed out that if the economy is not good, the government decided to adopt a relaxed policy, but can not ignore if the enterprise also foresaw the relaxed policy, it may take a reverse operation, and eventually the enterprise may not invest, so Lucas put forward a rational expectation.

To Romer, the core factor that he proposed was technology. Qian Jun said Romer's contribution lies in pointing out micro-endogenous issues such as technology and enterprise choice, such as how much R&D individual enterprises will choose to invest under macro-policies, when to embrace new technologies, how much investment in new technologies... And when these factors are superimposed, what kind of impact will they have on the country, that is, the so-called endogenous growth model guided by technology.

The Royal Swedish Academy of Sciences pointed out that Romer demonstrated how knowledge can be used as a long-term economic driver. Previous macroeconomic studies have emphasized technological innovation as a major driver of economic growth, but have not modeled how economic decisions and market conditions determine new technologies. Romer said This problem is solved.

Romer, who spent years with the World Bank chief economist during his tenure as World Bank chief economist and the bank's staff, was calm when he learned that he had been awarded a prize. As admirers poured into his blog, he tweeted, "The small cloud servers running my blog can't load up. If you see 404, try again in a few minutes. "


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