A call I received this morning from a (knowledgeable and very bright) economics reporter at the New York Times prompted me to reflect on the life and contributions of Bill Nordhaus, who sadly passed away on Friday. I knew and interacted with Bill many times over the past 35 years, since my days as a relatively young assistant professor at Harvard. I checked just now my database of past emails, as well as my records of letters and travels before the advent of email, and I was able to identify many occasions on which Bill and I had communicated over some thirty years, mainly but not exclusively about economic dimensions of climate change policy.
In the coming days, many economists and other academics will write about Bill Nordhaus’s important contributions to research on the economics of climate change, so I will focus instead in this brief essay on Bill’s contributions to public policy. I can do this relatively quickly because a few years ago, my Harvard colleague, Joe Aldy, and I wrote an article (Climate Change Economics, 2020, Volume 11, Number 4) titled, “Rolling the Dice in the Corridors of Power: William Nordhaus’s Impacts on Climate Change Policy.” If you do not have access to the journal, I hope you will read the Harvard working paper version.
Nordhaus’s Contributions to Public Policy
Beyond the exceptionally important academic macroeconomic insights cited in his 2018 Nobel Prize, Nordhaus had significant influence on U.S. and international public policies to address climate change. Identifying those contributions is more challenging, partly because such influences are more subtle. That was the purpose of my 2020 article with Joe Aldy – to identify how Professor Nordhaus and his research had affected the path of climate change policy in the United States and around the world. In the sincere hope that you will have time to read our article, linked above, I will do little more in this essay than provide a brief summary, indeed little more than a table of contents.
In reflecting broadly on how economists have impacts on the formulation of public policies, Aldy and I identified three distinct pathways.
Direct Participation in the Policy World
First, there is direct participation in the policy world, such as via full-time government service or part-time service on a government committee. In the case of Bill Nordhaus, three engagements fell into this first pathway: (1) Member, Council of Economic Advisers, 1977-1979; (2) Chairman, National Academy of Sciences (NAS) Panel on Integrated Environmental and Economic Accounting, 1996-1999; and (3) Chairman, NAS Committee on the Effects of Provisions in the Internal Revenue Code on Greenhouse Gas Emissions, 2011-2013.
Directly Influencing the Formulation of Public Policies
The second of the three pathways is that of directly influencing the formulation of public policies, a pathway that is considerably less frequent than commonly assumed. One very significant example of this in the case of Nordhaus was the explicit use of Bill’s Dynamic Integrated Climate-Economy (DICE) model by the Obama and Biden administrations in their development of quantitative estimates of the “social cost of carbon” (Interagency Working Group on Social Cost of Carbon, United States Government 2010, 2013, 2015, 2016).
Indirectly Informing Public Policy
The third and final pathway is by far the most common: indirectly informing public policy. This category is the most challenging to assess, because the picture becomes clouded by the first half of the well-known proverb that “success has many fathers, but failure is an orphan.” Subject to that caveat, we examined six distinct ways in which Nordhaus’s economic research indirectly informed climate change policy: (1) examining the balance of economic growth and climate protection; (2) applications and extensions of the DICE model; (3) estimating the dynamically efficient time path of global greenhouse gas (GHG) emissions; (4) examining cost-effective methods of GHG emissions mitigation; (5) alternative approaches to international cooperation; and (6) policy-relevant intellectual debates (including those between Bill Nordhaus and Marty Weitzman).
Putting It All Together
The seminal contributions of Bill Nordhaus to fundamental scholarship on the long-run macroeconomics of global climate change are abundantly clear. But, as Joe Aldy and I found, it is more challenging to identify the impacts of Nordhaus and his research on public policy (in the climate domain). In the short term, at least, more easily digestible symbols – for example, targets of 2oC or 1.5 oC maximum temperature change by 2100 or net zero emissions in 2050 – may matter more for public policy than even the best, most rigorous scholarly research. This is hardly unique. The limited influence of economic analysis on real world policy making (apart from macroeconomic policy) has long been noted, although within the realm of environmental policy, such influence seems to have increased over recent decades.
In general, personal involvement in the policy world – in Nordhaus’s case decades ago at the Council of Economic Advisers and the National Academy of Sciences – typically provides the most transparent evidentiary trail. Although even here, it is clouded by the passage of time. Some of Nordhaus’s most important contributions to climate change policy from that period – such as his support at President Carter’s CEA of the use of benefit-cost analysis to assess proposed government regulations – came to fruition only years later, beginning in the Reagan administration, with the first formal requirements for Regulatory Impact Analysis (RIA).
The second pathway above, which many economists seem to think is important and even quite common, is that of directly influencing the formulation of public policies. When and if this occurs, the evidence ought to be abundant and compelling. So it is with the use of Nordhaus’s DICE model as one of three IAMs employed by the Obama and Biden administrations to estimate empirically the Social Cost of Carbon. That the SCC has itself been used repeatedly for benefit calculations in RIAs demonstrates this direct connection of Nordhaus’s research and the formulation of public policies. But it should not be surprising that we could identify only one example of the second pathway, because this pathway is a rare one in the work of any environmental economist.
The third pathway – indirectly informing public policy – is the most important one through which Nordhaus’s work has had impacts on public policy. Reflecting on the work of other scholars suggests that this is broadly the case for academic microeconomic research influencing public policy, at least in the environmental realm. But here the evidence can be difficult to discern, partly because “success has many fathers.”
William Nordhaus is surely the most important economist to have worked on climate change and climate change policy. If my assessment with Joe Aldy was correct that Nordhaus’s influence in the policy world was subtle and often indirect, then perhaps we should all be left with a sense of enhanced modesty regarding our own contributions to public policy. And that includes me.
I will miss seeing Bill, talking with him, and hearing his voice.
