Paul Romer

Paul Romer
Born	Paul Michael Romer 7 11, 1955
Birthplace	Denver, Colorado, U.S.
Nationality	American
Occupation	Economist, academic
Title	Seidner University Professor in Finance
Employer	Boston College
Known for	Endogenous growth theory, charter cities concept, "mathiness" critique
Education	University of Chicago (B.S.) Massachusetts Institute of Technology Queen's University University of Chicago (Ph.D.)
Awards	Nobel Memorial Prize in Economic Sciences (2018)
Website	[paulromer.net Official site]

Paul Michael Romer (born November 7, 1955) is an American economist and policy entrepreneur who holds the position of Seidner University Professor in Finance at Boston College. He is best known for his foundational contributions to endogenous growth theory, which fundamentally reshaped how economists understand the role of ideas, innovation, and technological change in driving long-run economic growth. For this work, Romer was awarded the 2018 Nobel Memorial Prize in Economic Sciences, shared with William Nordhaus, "for integrating technological innovations into long-run macroeconomic analysis." Over a career spanning more than four decades, Romer has held positions at several leading universities, including the University of Chicago, Stanford University, the University of California, Berkeley, the University of Rochester, and New York University. He served as Chief Economist and Senior Vice President of the World Bank from October 2016 until January 2018. Beyond academic economics, Romer has engaged in policy entrepreneurship, most notably through his advocacy of "charter cities" as a mechanism for institutional reform in the developing world, and through his critiques of what he termed "mathiness" in economic research. During the COVID-19 pandemic, he emerged as a prominent voice advocating for large-scale testing as an economic recovery strategy.

Early Life

Paul Michael Romer was born on November 7, 1955, in Denver, Colorado. He grew up in a politically active family; his father, Roy Romer, served as the 39th Governor of Colorado from 1987 to 1999 and later became superintendent of the Los Angeles Unified School District. This background in public service and policy would later influence Paul Romer's own engagement with policy entrepreneurship beyond the traditional confines of academic economics.

Romer attended Phillips Exeter Academy, one of the oldest and most selective preparatory schools in the United States, located in Exeter, New Hampshire. The rigorous academic environment at Phillips Exeter provided a strong foundation for his subsequent academic pursues.

Education

Romer pursued his undergraduate studies at the University of Chicago, where he earned a Bachelor of Science degree. He subsequently undertook graduate studies at multiple institutions. He spent time at Queen's University in Kingston, Ontario, where he worked with academic advisors Russell Davidson and Ivar Ekeland. He also studied at the Massachusetts Institute of Technology before returning to the University of Chicago for his doctoral work.

At the University of Chicago, Romer completed his Ph.D. in economics in 1983 under the supervision of José Scheinkman and Robert Lucas Jr., the latter himself a Nobel laureate known for his contributions to macroeconomics and rational expectations theory. Romer's doctoral dissertation, titled "Dynamic competitive equilibria with externalities, increasing returns and unbounded growth," laid the groundwork for what would become his most significant intellectual contribution: endogenous growth theory. The dissertation addressed a question that had long puzzled economists—how to formally model the sustained economic growth that characterized modern economies—by incorporating increasing returns and externalities into dynamic equilibrium models. The intellectual environment at the University of Chicago, with its emphasis on rigorous theoretical modeling and market-based approaches to economic analysis, profoundly shaped Romer's analytical framework.

Career

Early Academic Career and the Development of Endogenous Growth Theory

After completing his doctorate, Romer began his academic career at the University of Rochester, where he served as a faculty member. It was during this period and the years immediately following that he developed and published the work that would define his career and ultimately earn him the Nobel Prize.

The central problem Romer addressed was one of the most fundamental in economics: why do some economies grow and others stagnate? The dominant models of economic growth in the mid-twentieth century, particularly the Solow growth model developed by Robert Solow in the 1950s, treated technological progress as an exogenous factor—something that happened outside the model and was not explained by economic forces. While Solow's framework elegantly demonstrated that capital accumulation alone could not sustain long-run growth (due to diminishing returns), it left the most important driver of sustained growth—technological change—unexplained.

Romer's key insight was to develop models in which technological change arose endogenously from the purposeful actions of economic agents. In his seminal 1986 paper, "Increasing Returns and Long-Run Growth," published in the Journal of Political Economy, Romer presented a model in which knowledge accumulation by firms generated economy-wide increasing returns. The model showed how the aggregate stock of knowledge, generated as a by-product of individual firms' investment decisions, could drive sustained per capita growth. This paper represented a significant departure from the neoclassical growth framework and helped launch what became known as "new growth theory" or "endogenous growth theory."

Romer further developed these ideas in his 1990 paper, "Endogenous Technological Change," published in the Journal of Political Economy. This paper introduced a more fully specified model in which profit-maximizing firms intentionally invested in research and development to create new ideas. A critical feature of Romer's framework was the treatment of ideas as nonrival goods—once an idea is created, it can be used by many people simultaneously without being depleted, unlike physical goods. However, because ideas are at least partially excludable through mechanisms such as patents, firms can capture enough of the returns from innovation to justify their R&D investments.

This framework had profound implications. As Romer articulated in a phrase that has become widely quoted: "Growth springs from better recipes, not just from more cooking." Economic growth, in Romer's view, was not primarily about accumulating more physical inputs—more labor, more capital, more raw materials—but about discovering new and better ways to combine existing resources. The implication was that policies affecting education, research incentives, intellectual property protection, and openness to new ideas could have lasting effects on an economy's growth rate, not merely its level of output.

Romer also made contributions to the analysis of economic growth through other published works, including articles examining the relationship between trade and growth, and the role of human capital.

Positions at Stanford, Berkeley, Chicago, and NYU

Over the course of his career, Romer held faculty positions at several of the most prominent economics departments and business schools in the United States. After his initial appointment at the University of Rochester, he moved to the University of Chicago, where the intellectual tradition of the Chicago school of economics intersected with his own training. He also held positions at the University of California, Berkeley and at Stanford University's Graduate School of Business, where he was affiliated with the Center for International Development, the Stanford Institute for Economic Policy Research, and the Hoover Institution.

Romer subsequently joined New York University (NYU), where he served as a professor of economics. At NYU, he founded the Marron Institute of Urban Management, reflecting his growing interest in urbanization and governance. He also served as a researcher at the National Bureau of Economic Research and was a fellow at the American Academy of Arts and Sciences and the Center for Global Development.

In 1997, Time magazine recognized Romer as one of America's 25 most influential people, reflecting the impact his ideas about economic growth had achieved beyond the academic community.

Charter Cities

In the late 2000s and early 2010s, Romer became a prominent advocate for the concept of "charter cities"—a proposal to create new cities in developing countries governed under a charter that would import institutional rules and governance frameworks from more developed nations. The idea drew on Romer's growth theory by extending the logic of institutional reform: just as better "recipes" for production drive economic growth, better institutional "rules" could accelerate development.

Romer argued that charter cities would allow developing nations to bypass entrenched institutional problems by creating zones of good governance that could serve as models for broader reform. The concept attracted significant attention and debate. In a 2009 interview with The New York Times Freakonomics blog, Romer discussed the potential for charter cities to transform economic development.

The concept moved from theory toward practice when Honduras, one of the poorest countries in Central America, expressed interest in implementing a version of the charter city idea. The Honduran government passed legislation to create special development regions that would operate under different governance rules. Romer served as an advisor to the project. However, the initiative encountered significant political and legal obstacles. In 2012, Romer withdrew from the Honduras project, citing concerns about transparency and the governance of the process. The Honduran Supreme Court subsequently struck down portions of the original legislation, though modified versions of the special economic zones continued in various forms.

Despite the setbacks in Honduras, the charter cities concept continued to generate discussion among economists and development practitioners. The idea highlighted the importance of institutional frameworks and governance quality in economic development—themes that connected directly to Romer's broader intellectual contributions about the role of ideas and rules in generating economic growth.

Chief Economist of the World Bank

In October 2016, Romer was appointed Chief Economist and Senior Vice President of the World Bank under President Jim Yong Kim, succeeding Kaushik Basu in the role. The appointment of a scholar of Romer's stature signaled the institution's interest in bringing fresh intellectual perspectives to its development mission.

During his tenure at the World Bank, Romer sought to reform certain internal practices. He reportedly warned against the tendency of bank staff to overload reports with pet projects and messages, arguing that this practice had diluted the impact of past publications.

However, Romer's tenure was cut short by a controversy surrounding the World Bank's "Doing Business" report, an influential annual publication that ranked countries on the ease of doing business within their borders. In January 2018, Romer publicly raised concerns that Chile's ranking in the report may have been subject to political manipulation, suggesting that methodological changes had unfairly penalized Chile during the tenure of its left-leaning president, Michelle Bachelet. The Chilean government demanded answers regarding the integrity of the rankings.

The controversy escalated rapidly, and Romer resigned from his position on January 24, 2018, after approximately fifteen months in the role. He was succeeded by Shanta Devarajan as acting Chief Economist. Following his departure from the World Bank, Romer returned to his faculty position at NYU. The episode illustrated the tensions that can arise when academic economists accustomed to intellectual independence operate within large bureaucratic institutions, and it underscored the political sensitivity of international development rankings.

"Mathiness" Critique

In 2015, Romer published a paper in the American Economic Review in which he coined the term "mathiness" to describe what he viewed as the misuse of mathematical formalism in economic research. Romer argued that some economists were using sophisticated mathematical models not to clarify economic arguments but to obscure them—dressing up weak or politically motivated claims in the language of rigorous mathematics to give them an undeserved appearance of precision and objectivity.

The "mathiness" critique resonated with ongoing debates within the economics profession about the appropriate role of formal modeling, the replicability of empirical results, and the relationship between theoretical elegance and empirical relevance. Romer's willingness to challenge established practices within his own profession reflected a broader concern about intellectual integrity in academic research.

COVID-19 Pandemic Response

During the COVID-19 pandemic in 2020, Romer became a vocal advocate for large-scale, widespread testing as the primary strategy for reopening the economy while managing the public health crisis. In an interview with The New Yorker in May 2020, Romer argued that frequent, universal testing could allow individuals to safely return to economic activity by identifying and isolating infected persons before they could spread the virus widely. His proposals drew on economic reasoning—the costs of mass testing, he argued, were far lower than the costs of prolonged economic shutdowns. Romer also discussed the potential limitations of digital contact tracing and the resistance Americans might have to surveillance-based approaches to pandemic management.

Policy Advocacy on Big Tech

Romer has also been an active participant in debates about the regulation of large technology companies. In a 2021 discussion hosted by the University of Chicago, Romer argued in favor of a Pigouvian tax on digital advertising revenue that would increase with the size of the firm being levied, as a mechanism to curb market concentration in the technology sector. This proposal reflected Romer's broader view that the accumulation of market power by a small number of firms posed risks to competition and innovation—the very forces that, according to his own growth theory, drive long-run economic progress.

Boston College

In May 2023, Romer joined Boston College as the Seidner University Professor in Finance within the Carroll School of Management. The appointment reflected a new phase in Romer's career. According to a 2024 profile by Boston College, Romer has used his position to explore new directions in his research and teaching, continuing to engage with questions about growth, innovation, and institutional design.

Personal Life

Romer's father, Roy Romer, served as Governor of Colorado from 1987 to 1999. Paul Romer has maintained his personal life largely out of public view, with his public engagements focusing on his academic and policy work. He maintains a personal website where he has shared writings on economics, policy, and related topics.

Recognition

Romer's most significant honor is the 2018 Nobel Memorial Prize in Economic Sciences, which he shared with William Nordhaus of Yale University. The Royal Swedish Academy of Sciences awarded the prize for their respective contributions to integrating technological innovation and climate change into long-run macroeconomic analysis. Romer was recognized specifically for his work showing "how knowledge can function as a driver of long-term economic growth" and for developing models in which "economic forces govern the willingness of firms to produce new ideas and innovations."

In 1997, Time magazine named Romer one of its "25 Most Influential Americans," a recognition that reflected the broad impact his ideas about economic growth had achieved across both academic and policy circles.

Romer has been elected a fellow of the American Academy of Arts and Sciences and the Center for Global Development. He has also been affiliated as a researcher with the National Bureau of Economic Research. Boston College described him upon his appointment in 2023 as "one of the most influential economists of this century."

Legacy

Paul Romer's contributions to economics have had a lasting effect on both academic research and economic policy. His endogenous growth theory, developed primarily in his 1986 and 1990 papers, fundamentally changed how economists model long-run economic growth. Before Romer's work, the dominant Solow growth model treated technological progress as an unexplained external force. Romer's framework demonstrated that ideas—nonrival goods generated by profit-seeking agents—could be incorporated into formal economic models, providing an endogenous explanation for sustained growth.

The policy implications of Romer's theory have been substantial. By demonstrating that the production of new ideas responds to economic incentives, his work provided an intellectual foundation for policies aimed at promoting research and development, protecting intellectual property, investing in education, and fostering open exchange of knowledge. His growth models influenced how governments, international organizations, and development practitioners think about the determinants of long-run prosperity.

Romer's concept of charter cities, while not implemented as he originally envisioned, contributed to broader discussions about the role of institutions and governance in economic development. The idea that institutional rules could be treated as a form of technology—amenable to adoption, adaptation, and improvement—extended the logic of endogenous growth theory into the domain of political economy and institutional reform.

His doctoral students, including Sérgio Rebelo and Maurice Kugler, have gone on to make their own contributions to the field of economics. The broader research program in endogenous growth theory that Romer helped establish has generated a substantial body of subsequent work by economists around the world.

Romer's critique of "mathiness" and his willingness to challenge established practices—whether at the World Bank, in academic journals, or in debates about technology regulation—reflect an intellectual independence that has characterized his career. His advocacy for mass COVID-19 testing and his proposals for taxing large technology firms demonstrate a continued engagement with pressing policy questions, applying economic reasoning to problems that extend well beyond the traditional boundaries of growth theory.