William Nordhaus

William Nordhaus
Nordhaus in Stockholm, December 2018
William Nordhaus
Born	William Dawbney Nordhaus 31 5, 1941
Birthplace	Albuquerque, New Mexico, U.S.
Nationality	American
Occupation	Economist, academic
Title	Sterling Professor of Economics
Employer	Yale University
Known for	Integrating climate change into macroeconomic analysis; DICE model; climate clubs concept
Education	Massachusetts Institute of Technology (PhD)
Awards	BBVA Foundation Frontiers of Knowledge Award (2017) Nobel Memorial Prize in Economic Sciences (2018)
Website	[https://economics.yale.edu/people/william-d-nordhaus Official site]

William Dawbney Nordhaus (born May 31, 1941) is an American economist and Sterling Professor of Economics at Yale University, where he has spent the majority of his academic career. He is best known for his pioneering work in integrating climate change into long-run macroeconomic analysis, a contribution for which he was awarded the 2018 Nobel Memorial Prize in Economic Sciences, shared with Paul Romer. Born in Albuquerque, New Mexico, Nordhaus studied at Yale as an undergraduate before earning his doctorate at the Massachusetts Institute of Technology under the supervision of Robert Solow. Over a career spanning more than five decades, he developed the Dynamic Integrated Climate-Economy (DICE) model, one of the first integrated assessment models to quantify the economic impacts of climate change and evaluate policy responses such as carbon taxes. His more recent work on "climate clubs" has offered a novel institutional framework for overcoming free-riding in international climate agreements. Though his conclusions about the optimal pace and scope of climate policy have drawn both praise and criticism, Nordhaus remains one of the most influential figures in the field of environmental economics and climate policy analysis.

Early Life

William Dawbney Nordhaus was born on May 31, 1941, in Albuquerque, New Mexico. He grew up in New Mexico, a state whose landscape and environment would form part of the backdrop to his later interest in the relationship between human economic activity and the natural world.

Nordhaus has a brother, Robert Nordhaus, who also became involved in energy and climate issues but from a legal rather than economic perspective. A 2014 profile in The New York Times described the two brothers as working "different angles in taking on climate change," with William approaching the problem through economic modeling and Robert through energy law and regulation. The parallel careers of the Nordhaus brothers reflected a family engagement with questions of energy, the environment, and public policy that would define much of William's intellectual life.

Education

Nordhaus attended Yale University as an undergraduate, earning his Bachelor of Arts degree in 1963. He also received a Master of Arts degree from Yale. During his studies, he also spent time at Sciences Po in Paris, broadening his exposure to international perspectives on economics and public policy.

Nordhaus pursued his doctoral studies at the Massachusetts Institute of Technology, one of the leading centers of economics research in the United States. He completed his PhD in 1967 with a dissertation titled A Theory of Endogenous Technological Change, written under the supervision of Robert Solow, who had himself received the Nobel Memorial Prize in Economic Sciences in 1987 for his contributions to the theory of economic growth. The influence of Solow's growth theory on Nordhaus's thinking was substantial: Nordhaus's later work would extend growth modeling to incorporate the long-run costs and dynamics of environmental degradation and climate change, building on the analytical frameworks he first encountered at MIT.

Career

Early Academic Career at Yale

After completing his doctorate at MIT, Nordhaus joined the faculty of Yale University, the institution where he had earned his undergraduate degree. He would remain at Yale for the entirety of his academic career, eventually rising to the rank of Sterling Professor of Economics, one of the highest academic honors bestowed by the university. In the early years of his career, Nordhaus published on a range of topics in macroeconomics and public policy, contributing to the academic literature on productivity, inflation, and economic growth.

Nordhaus also served on the Board of Directors of the American Economic Association and was named a Distinguished Fellow of the organization, recognizing his broad contributions to the discipline.

Development of the DICE Model

Nordhaus's most significant and enduring contribution to economics has been his development of the Dynamic Integrated Climate-Economy (DICE) model, which he began constructing in the 1970s and refined over subsequent decades. The DICE model was among the first integrated assessment models (IAMs) designed to link the dynamics of economic growth and energy use with the physics of climate change. The model simulates how carbon dioxide emissions from economic activity lead to atmospheric warming, which in turn produces economic damages, and it allows researchers and policymakers to evaluate the costs and benefits of various climate policies, including carbon taxes and emissions reduction targets.

The Royal Swedish Academy of Sciences, in announcing the 2018 Nobel Prize, specifically cited Nordhaus's creation of the DICE model as a major reason for the award, noting that he had "integrated climate change into long-run macroeconomic analysis." The DICE model and its regional variant, the RICE model, became standard tools in climate economics and were used by governments and international organizations to evaluate the economic implications of different emissions pathways and policy interventions.

A key output of Nordhaus's modeling work was the concept of the "social cost of carbon" — an estimate of the economic damage caused by each additional ton of carbon dioxide emitted into the atmosphere. By quantifying this cost, Nordhaus provided a basis for designing carbon taxes that would reflect the true social cost of fossil fuel use. In a 2014 interview with NPR, Nordhaus described his preferred policy approach — a carbon tax — as "a tough sell but worth it," acknowledging the political challenges of implementing such a policy while maintaining that it was the most economically efficient response to climate change.

Climate Policy Analysis and the Carbon Tax

Throughout his career, Nordhaus has been a prominent advocate for the use of a carbon tax as the primary mechanism for reducing greenhouse gas emissions. He has argued that a carbon tax is superior to other policy instruments, such as cap-and-trade systems or regulatory mandates, because it directly corrects the market failure associated with carbon emissions by putting a price on the externality. His modeling work has consistently shown that a gradually rising carbon tax, starting at a moderate level and increasing over time, would be the most cost-effective way to slow global warming while minimizing economic disruption.

However, Nordhaus's analysis has also led him to conclusions that have placed him at odds with some climate activists and the targets established by international agreements. His DICE model has at times suggested that the optimal level of warming — balancing the costs of abatement against the damages of climate change — is higher than the targets set by the United Nations Framework Convention on Climate Change. An analysis published by the Library of Economics and Liberty in 2018 noted that "although Nordhaus favors a carbon tax to slow climate change, his own model shows that the UN's target would make humanity poorer than doing nothing at all," highlighting the tension between Nordhaus's economic optimization framework and the more stringent emissions targets preferred by many climate scientists and policymakers.

This tension has been a recurring theme in discussions of Nordhaus's work. While he is credited with being one of the first economists to take climate change seriously as an economic problem, some climate scientists and environmental advocates have criticized his models for underestimating the potential damages of extreme warming scenarios, discounting future damages too heavily, and thereby recommending a pace of emissions reductions that they consider insufficiently urgent. A 2023 article in The Intercept characterized some of these critiques, questioning whether economic models like Nordhaus's adequately capture the catastrophic risks of climate change.

A 2018 analysis by the Centre for Economic Policy Research (CEPR) provided a more balanced assessment, noting that Nordhaus's work had been instrumental in establishing the field of climate economics and that the DICE model, despite its limitations, had "provided a framework within which to think about the problem of climate change in an integrated way."

Climate Clubs

In more recent years, Nordhaus has focused on the institutional architecture of international climate agreements, developing the concept of "climate clubs" as a mechanism for overcoming the free-rider problem that has plagued global climate negotiations. The central challenge, as Nordhaus has described it, is that individual countries have an incentive to benefit from the emissions reductions of others without making costly reductions of their own, leading to a collective action failure.

Nordhaus proposed that countries committed to meaningful climate action form a "club" that would impose trade penalties — such as tariffs — on non-participating nations. This mechanism, he argued, would create economic incentives for countries to join the club and adopt carbon reduction policies, thereby transforming the dynamic of international climate negotiations from a voluntary, non-enforceable framework to one with real economic consequences for non-participation.

He outlined this concept in a paper published in the American Economic Review titled "Climate Clubs: Overcoming Free-Riding in International Climate Policy." The idea was further elaborated in articles in Foreign Affairs, where Nordhaus wrote in 2020 that "past climate treaties have failed because of poor architecture" and argued that "the key to an effective climate treaty is to change the architecture." In a subsequent 2021 essay in the same publication, titled "Why Climate Policy Has Failed," Nordhaus offered an economic perspective on the persistent shortcomings of international climate agreements and reiterated his call for a club-based approach.

The climate clubs concept has gained traction in policy discussions and has influenced thinking about the design of future international climate agreements. It represents Nordhaus's continued engagement with both the economic theory and practical policy dimensions of climate change, extending his work beyond modeling and into institutional design.

Other Contributions

Beyond climate economics, Nordhaus has made contributions to several other areas of economics. His doctoral dissertation on endogenous technological change addressed questions about how innovation and technological progress are generated within the economic system, rather than being treated as an external factor. He has also contributed to the study of economic measurement, including work on the economics of light and the measurement of economic output and welfare.

Nordhaus is also known as the co-author, with Paul Samuelson, of the widely used economics textbook Economics, which has been published in numerous editions and translated into many languages. This textbook introduced generations of students to the principles of economics and helped establish Nordhaus's reputation as both a researcher and an educator.

Personal Life

William Nordhaus married Barbara Feise, as announced in The New York Times in May 1964. He has maintained a relatively private personal life throughout his career, with public attention focused primarily on his academic work and policy contributions.

Nordhaus has spent the bulk of his professional life in New Haven, Connecticut, where Yale University is located. His brother, Robert Nordhaus, pursued a career in energy law, and a 2014 New York Times profile described the brothers' complementary approaches to energy and climate issues, with William working through economic analysis and Robert through legal and regulatory frameworks.

Recognition

Nordhaus's contributions to economics and climate policy have been recognized with numerous awards and honors over the course of his career. The most prominent of these is the 2018 Nobel Memorial Prize in Economic Sciences, which he shared with Paul Romer. The Royal Swedish Academy of Sciences awarded Nordhaus the prize "for integrating climate change into long-run macroeconomic analysis," citing his development of the DICE model and his broader contributions to understanding the economic dimensions of climate change. YaleNews reported the award, noting that Nordhaus was "the world's leading economist on climate change" and a Yale alumnus who had earned both his bachelor's and master's degrees at the university before returning to spend his entire career there.

In 2017, Nordhaus received the BBVA Foundation Frontiers of Knowledge Award, another major international recognition of his work in climate economics. He was also named a Distinguished Fellow of the American Economic Association, an honor reserved for economists who have made exceptional contributions to the discipline.

The New York Times, in its coverage of the Nobel Prize announcement, provided biographical context for Nordhaus's career and noted the significance of the award in recognizing the economic study of climate change as a central concern of the discipline.

Legacy

William Nordhaus's legacy in economics is defined primarily by his role in establishing climate change as a subject of rigorous economic analysis. Before his work, the economics profession had largely treated environmental degradation and climate change as peripheral concerns, outside the core of macroeconomic theory. By developing the DICE model and demonstrating that climate change could be analyzed within the framework of long-run economic growth theory, Nordhaus helped create the field of climate economics and provided tools that have been used by governments, international organizations, and researchers around the world.

His advocacy for a carbon tax as the most efficient policy response to climate change has shaped debate on the subject for decades. While not all economists or policymakers agree with the specific parameters of his models or his conclusions about the optimal pace of emissions reductions, the framework he established — comparing the costs of climate action against the costs of inaction within a rigorous economic model — has become the standard approach to climate policy analysis. The CEPR noted that his work "provided a framework within which to think about the problem of climate change in an integrated way," a contribution whose significance extends far beyond any particular model specification or policy recommendation.

His more recent work on climate clubs has addressed one of the most persistent obstacles to effective international climate policy: the free-rider problem. By proposing a mechanism grounded in trade incentives and penalties, Nordhaus has offered a practical institutional design that has influenced ongoing discussions about the architecture of future climate agreements.

At the same time, Nordhaus's work has been the subject of significant debate. Critics have argued that his models underestimate the damages of climate change, particularly in scenarios involving extreme or catastrophic warming, and that his use of discount rates effectively undervalues the welfare of future generations. These debates reflect broader tensions within climate economics about how to weigh present costs against future risks, and they have contributed to an evolving and increasingly sophisticated literature on the economics of climate change.

Regardless of one's position in these debates, Nordhaus's influence on the field is difficult to overstate. He brought quantitative economic analysis to a problem that had previously been discussed primarily in scientific and environmental terms, and in doing so, he helped make climate change a central concern of economic theory and public policy. His career, spanning more than five decades at Yale University, represents one of the most sustained and consequential engagements of any economist with the challenge of climate change.