Results for “nordhaus” 34 found
Who will win the Nobel Prize in economics this year?
Greg Mankiw asks and receives many answers.
One guess is William Nordhaus, for his concept of "green accounting." An environmental prize is overdue but perhaps Nordhaus is too skeptical about stringent anti-global warming measures to get the appropriate reception in Stockholm.
Another option is Eugene Fama, both for testing CAPM for securities prices and for figuring out what is wrong with it. You can imagine pairing his prize with either Richard Thaler (behavioral finance) or Kenneth French (Fama’s co-author on many important papers).
Or how about Oliver Williamson and/or Jean Tirole for principal-agent theory as applied to the business firm?
I would offer the prize jointly to Anne Krueger, Jagdish Bhagwati, and Gordon Tullock for their work on rent-seeking, but that is not my prediction. Readers, what do you think?
Implications of a zero discount rate
From the comments, Jane Galt asks:
…doesn’t a zero discount rate imply that even something that imposes trivial costs on each future generation should be avoided at catastrophic cost to us?
I would pose the question more broadly. If a policy imposes a great cost on one person, but involves many small benefits for others, should we always evaluate that policy by summing the respective costs and benefits and finding the net value?
The same question can be posed in both intertemporal and atemporal contexts. Philosopher Alastair Norcross made his name by considering Parfit-like conundrums. Let one person die a terrible and tortured death, but alleviate the headaches of billions of others by one second. (No, by its construction, this is not an exercise in risk reduction or Rawlsian reasoning. It is just a brute comparison of certain costs and benefits.) If the billions are large enough in number, is this worth it? Or does the suffering of the lone individual hold special status?
If we are willing to swallow this trade-off, we can accept it in the intergenerational comparison as well. I would myself balk at the notion, citing a mushy mish-mash of philosophic pluralism, quasi-lexical values, and the conceit of my moral intuitions. My conclusion is that we should modify cost-benefit analysis for (among other things) distributional concerns, but that the cost-benefit analysis should itself be done straight up. In any case, a non-zero discount rate, applied to consumption streams, would not do justice to the relevant moral intuitions about distribution. We might wish to count the wealthy for less, but not everyone in the future will be so wealthy, especially when China, India, and Bangladesh matter for the issue at hand.
Addendum: Here is commentary from Jonathan Adler.
More Nobel Prize ideas
1. Nobel prize in environmental economics to Weitzman, Nordhaus
2. Nobel prize in trade theory to Bhagwatti and Dixit
3. Nobel prize in President Bush praising to Krugman and David Brooks
4. Nobel prize in behavioral stuff to Richard Thaler
5. Nobel prize in contracts to Hart, Holmstrom, and Oliver Williamson
6. Nobel prize in development economics to Dasgupta and Deaton
7. Nobel prize in finance to Fama
8. Nobel Price in mechanism design to Milgrom, Myerson and Maskin
9. Nobel prize in family economics to Mincer and Pollak
10. Prize in Political Economy to Alesina, Persson and Tabellini
11. Prize in Modern Macro to Barro and Sargent
The returns from innovation
In a recent NBER working paper – “Schumpeterian Profits in the American Economy: Theory and Measurement” – Yale economist William Nordhaus estimates that innovators capture a mere 2.2% of the total “surplus” from innovation. (The total surplus of innovation is, roughly speaking, the total value to society of innovation above the cost of producing innovations.) Nordhaus’s data are from the post-WWII period.
The smallness of this figure is astounding. If it is anywhere close to being an accurate estimate, the implication is that “society” pays a paltry $2.20 for every $100 worth of welfare it enjoys from innovating activities.
That’s from Don Boudreaux at Cafe Hayek. To some extent fame incentives alleviate underinvestment in new ideas. To some extent I advocate favorable tax and legal treatment for innovation.