William Nordhaus, Distinguished Fellow 2004
Throughout his career, William Nordhaus has displayed a knack for asking large questions about the measurement of economic growth and well-being, and addressing them with simple but creative insights. He is the rare economist who focuses on the omissions in standard statistical measures of economic growth and, therefore, how they can be a misleading indicator of living standards. His work has fundamentally changed the way economists think about national income, productivity, and well-being.
Long before other economists, Nordhaus worked to adjust national income accounts to reflect the true costs of environmental degradation, as well as of traffic congestion and crime. This led to research on global warming and climate change, and how natural resources constrain economic growth. Since the 1970s, he has constructed integrated economic and scientific models to determine the efficient path for coping with climate change. His DICE model (Dynamic Integrated model of Climate and the Economy) employs a simple cost-benefit framework for determining the optimal "steady-state" control of carbon dioxide and other greenhouse gases (see his Managing the Global Commons: The Economics of Climate Change).
Nordhaus has identified several reasons why national income statistics do not account for important intangible benefits of modem life-notably, increased leisure, better health, and longer life. In The Economics of New Goods (Timothy F. Bresnahan and Robert J. Gordon, eds.), Nordhaus calculated the average growth in the "true" price of a single product-light-that resulted from technological change through the millennia, and demonstrated that traditional price indexes drastically understate the pace of technological change.
Nordhaus has also argued persuasively that the underestimation of economic growth resulting from failure to translate increased longevity into GDP is substantial-that, adjusted for the value added by those extra years, the American economy grew twice as fast during the twentieth century as the measured rate shows (see The Economic Value of Medical Research, Kevin M. Murphy and Robert H. Topel, eds.). He has written influential papers on the role of information technology in productivity advances, and has been a leader in probing the precise reasons for, and magnitude of, the shortcomings of national income statistics. He has also sought to make practical changes to the national income product accounts as a result of the research of economists.
Nordhaus has made other important contributions to economics as well. His 1975 paper on "The Political Business Cycle" in the Review of Economic Studies helped launch the study of how politics matters for macroeconomic fluctuations. This work has spawned a large literature.
William Nordhaus is Sterling Professor of Economics at Yale University. He served from 1977 to 1979 as a member of the Council of Economic Advisers under President Jimmy Carter. In that role, he had special responsibilities for energy policy, international economic affairs, environmental issues, and tax policy. From 1986 to 1988 he was Provost of Yale University, and from 1992 to 1993 was Vice President for Finance and Administration. With Paul Samuelson, he is co-author of the classic textbook Economics.