Skiing in the desert
William Dawbney Nordhaus was born on May 31, 1941, in Albuquerque, New Mexico, the son of Virginia (Riggs) Nordhaus and Robert J. Nordhaus, a lawyer. His father came from a German Jewish family: Robert’s father, Max Nordhaus, had emigrated from Paderborn in Germany in 1883 and became a manager of the Charles Ilfeld Company, a major mercantile business in New Mexico. Robert served as an Army captain with the Tenth Mountain Division, the American ski troops, in the Italian campaign of the Second World War. After the war he set out to build a ski area, La Madera, on the Sandia Mountains above a city that averages about ten inches of snow a year, and he went on to co-found the Sandia Peak Tramway.
William was the third of three boys, followed by a sister, Betsy. His eldest brother, Bob, became a leading drafter of energy and environmental legislation for the U.S. House of Representatives; his second brother, Dick, became an architect. In his Nobel autobiography Nordhaus describes his father as a stern figure with a firm sense of who should be called sir, and recalls that by the time he came along his parents largely left him alone, which he called heaven. His earliest memories are of trout fishing, skiing and an alfalfa field outside his window. As a boy he tried to predict snowfall with what he called quixotic mathematics, because the difference between snow and drought was the difference between happiness and boredom.
Yale, Paris and MIT
Nordhaus attended Phillips Academy in Andover and then Yale, where he studied classics of literature, art and social science in the Directed Studies programme. He spent his junior year at Sciences Po in Paris, where economics teaching was, he says, a backwater, but where one sunny afternoon at a café he met a fellow student, Barbara Feise, who became his wife. Back at Yale he studied macroeconomics with James Tobin and graduated in 1963.
He earned his Ph.D. at the Massachusetts Institute of Technology in 1967, learning from Robert Solow, Paul Samuelson and Kenneth Arrow alongside fellow students George Akerlof, Joseph Stiglitz and Martin Weitzman. That year he returned to Yale as an assistant professor, and he has stayed there for his whole career, becoming Sterling Professor of Economics, the university’s highest academic rank. He also served as Yale’s provost and as a member of President Jimmy Carter’s Council of Economic Advisers from 1977 to 1979.
Measuring what matters
Nordhaus has always been drawn to big questions about how to measure economic progress. In 1972, with James Tobin, he published “Is Growth Obsolete?”, which proposed a Measure of Economic Welfare that adjusted national income for things like leisure and environmental damage, an early attempt at environmental accounting. He later showed, in a celebrated study of the history of lighting, that official statistics badly understate improvements in living standards because they miss the gains from new and better goods. He has also written on the political business cycle and on the economics of innovation.
From 1985 he co-authored the classic introductory textbook Economics with Paul Samuelson, working on its editions from the twelfth to the nineteenth. First published in 1948, it has appeared in many languages and taught generations of students worldwide.
From energy to climate
In the early 1970s, the age of doomsday books such as The Limits to Growth, Nordhaus built energy models that showed the predictions of imminent resource exhaustion were highly sensitive to assumptions. But he took the underlying question seriously, and a 1970 MIT report on human impacts on the global environment turned his attention to global problems. In 1974 and 1975 he spent a year at the International Institute for Applied Systems Analysis in Vienna, where, by the luck of the office lottery, he shared a room with the climatologist Allan Murphy, who encouraged him to think about how the economy affects the climate.
Knowing nothing about climate science, he taught himself, and with a few months of programming on punched cards he built what he describes as the first integrated assessment model of climate-change economics. When the head of his energy programme ordered him to drop the carbon dioxide work, he went around him to the institute’s director, who simply moved him to another programme. In the 1977 publication of that work he interpreted the model’s shadow price on carbon dioxide as the basis for a carbon tax. The idea, he later wrote, lay fallow for years and then resurfaced as the social cost of carbon. In the same work he suggested, as a first approximation, keeping warming within about 2 °C, the threshold later adopted in the 2015 Paris Agreement, though he stressed that targets should weigh costs against benefits.
His route to climate began with energy. Using the linear programming methods championed by his Yale colleagues Tjalling Koopmans and Herbert Scarf, he built what he called the Bulldog model of the world energy system, assisted by a Yale undergraduate named Paul Krugman. It found that the efficient price of oil was close to actual market prices in the 1960s and early 1970s and pointed to a gradual shift away from oil and gas. Just as the work was to be presented, the 1973 oil crisis broke. Nordhaus concluded that the crisis was mainly one of mismanaged energy regulation, not of the world running out of everything, but that global environmental problems were a different matter.
The DICE model
Over the next two decades Nordhaus worked to fix the shortcomings of his first model. The result was the Dynamic Integrated model of Climate and the Economy, or DICE, first published in Science in 1992 after economics journals had rejected it. DICE links a model of economic growth to equations for carbon emissions, the carbon cycle, the climate and the damage that warming does to the economy, so that the costs of cutting emissions can be weighed against the damages they prevent. He later added a regional version, RICE, and versions with uncertainty, innovation and international coalitions.
The Royal Swedish Academy of Sciences said his model integrates theories and empirical results from physics, chemistry and economics and is now used to simulate how the economy and the climate co-evolve, and to examine the consequences of policies such as carbon taxes. Nordhaus says he receives emails almost every day from scholars and students around the world asking about it. Critics, including Nicholas Stern, Martin Weitzman and Robert Pindyck, have argued that DICE’s discounting and damage estimates understate the risks of severe warming, and some climate scientists were disappointed that his recommended carbon prices were lower than many thought necessary. Nordhaus has engaged with these debates and has acknowledged that arguments about damages remain as heated as ever.
Nordhaus has stressed the difference between parts of the economy that can adapt and parts that cannot. His boyhood ski area, he notes, would lose its snow as the climate warms, yet snow-making has allowed many ski slopes to expand. Managed systems like these, and much of modern agriculture and industry, can adapt to moderate warming. Unmanaged systems cannot: rain-fed farming, seasonal snowpacks, river flows, threatened species and natural ecosystems, and the oceans, where he warns that rising carbon dioxide threatens crustaceans. Those vulnerable systems are where he sees the gravest risks.
Putting a price on carbon
Nordhaus’s central policy message is simple: greenhouse gas emissions impose costs on everyone that the people causing them do not pay, and the most efficient remedy is a universal, harmonized price on carbon, through a tax or a cap-and-trade system. His models made it possible to estimate what that price should be. In 2009 and 2010 a U.S. federal working group of six agencies and White House offices used DICE, together with two other models, to set the first official estimates of the social cost of carbon. Agencies have since used such estimates to measure the benefits of rules such as appliance efficiency standards and vehicle fuel economy and emissions standards.
Carbon prices are now used in the European Union, Canada, Sweden and many other places, and the social cost of carbon is a standard tool for weighing climate policies. In his 2015 presidential address to the American Economic Association Nordhaus proposed a climate club: countries that agree on a minimum carbon price would place a modest tariff on imports from countries that do not join, removing the incentive to free-ride. His modelling suggested that tariffs of under five percent could bring most countries in. The idea has been widely debated, and the European Union’s carbon border adjustment mechanism has been described as a possible step toward such a club.
Family and heritage
Nordhaus’s Jewish heritage comes through his father’s family, German Jews who settled in New Mexico in the nineteenth century; he himself describes his father as having a German-Jewish background. His sister, Betsy, has lived around the world and now lives in Israel with her extended family. He is listed among Jewish Nobel laureates by the Jewish Virtual Library. He has not written publicly about religious practice.
Nordhaus and Barbara, a clinical social worker and psychoanalyst who worked at Yale’s Child Study Center, live in New Haven. They have three children, Jeff, Monica and Rebecca, and grandchildren, and they still ski together. His nephew Ted Nordhaus is a well-known writer on energy and the environment. In 2018 he shared the Nobel Memorial Prize in Economic Sciences with Paul Romer, his own award recognizing him for integrating climate change into long-run macroeconomic analysis.
Legacy
Before Nordhaus, climate change was a question for physical scientists, and economics had no way to compare the costs of acting with the costs of doing nothing. He built the tools that made that comparison possible and gave governments a number, the social cost of carbon, to put into their policy decisions. Whatever their views of his particular estimates, almost all later climate-economy models build on his framework.
He ends his Nobel autobiography with a hope for his grandchildren and their descendants: that by 2100 they will look back and say that this generation had the resolve to take the steps necessary to preserve our unique and beautiful planet.
Sources & further reading
William D. Nordhaus, Biographical, NobelPrize.org · Popular information: The Prize in Economic Sciences 2018, NobelPrize.org · Estimating the Social Cost of Carbon for Regulatory Impact Analysis, Resources for the Future · Jewish Nobel Prize Laureates, Jewish Virtual Library · William Nordhaus, Wikipedia · Researched from the sources above and checked against them. Spotted an error? Tell us.
A life of tikkun olam. This is part of tikkun olam, the Jewish idea of repairing the world, and every one of us can add to it.