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Romer and Nordhaus’s Nobel Winning Contributions
The contributions of Paul Romer and William Nordhaus to both economic theory and policy are critically assessed here. By undertaking a brief history of economic thinking prior to their pioneering work, it validates the Nobel award. However, it is argued that the Nobel Prize has mostly been awarded to work that employs neoclassical, or more accurately, marginalist assumptions. On the policy front, it is suggested that India should formulate its economic policies by drawing inspiration from some of the work by Samuel Bowles and Mariana Mazzucato alongside that of Romer and Nordhaus.
The author wishes to thank Niranjan Rajadhyaksha, Bhavya Sinha, Limakumba Walling, and especially, Arjun Jayadev for helpful comments.
This article is a revised version of his talk delivered at the First Annual Bengaluru Central University Distinguished Nobel Lecture Series on 16 November 2018.
The contributions of the Nobel laureates in economic sciences are better understood when seen against the backdrop of larger changes the discipline of economics has undergone. Mainstream economics has transitioned from a “science of wealth” to a “science of choice;” the major representatives of the former are Adam Smith, David Ricardo, and Karl Marx and that of the latter are William Stanley Jevons, Alfred Marshall, and Paul Samuelson. This transition has been accompanied by a move from methodological holism to methodological individualism. In other words, the basic unit of analysis has shifted from a social class to an individual. Another important characteristic of the work of Jevons, Marshall, and Samuelson is the adoption of the marginalist approach—the use of counterfactual concepts such as marginal utility, marginal revenue, and marginal cost—in the determination of value and income distribution. The work of both Paul Romer and William Nordhaus employs the marginalist approach.
Intellectual Context
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