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Think about how the world has changed in just a few decades. Are you old enough to remember the world without computers everywhere? Was the weather different in your childhood? And how do these big changes interact with the economy?
The winners of this year's Nobel Prize in economics, Paul Romer and William Nordhaus, have each, in their way, transformed how we think about economic growth in just these ways - Romer, by deepening our understanding of innovation, and Nordhaus by modelling how growth affects the climate and is affected by the climate in turn.
Before them, economists basically explained growth as a result of physical investment and capital accumulation. Then Romer thought deeply about how productivity depends on ideas - how smart we are about producing things even with a given amount of capital and labour. And he created models of how political and economic institutions affect how fast our economies innovate.
Nordhaus brought the science of climate change into economics. He built the first integrated models of how economic activity and the climate influence one another in complex ways. His work underpins all the estimates of the cost of containing climate change and the much larger cost of doing nothing.
In our lifetimes, technological and environmental change have transformed how our economies work. Next time you marvel about your favourite smartphone app or worry about increasingly extreme weather, give a thought to Romer and Nordhaus. Thanks to them, we are in a better place to find good policies to deal with both innovation and climate change. Their prizes are well-deserved.
