Nobel economics prizes with a futuristic view

Yale University Professor William Nordhaus, one of the 2018 winners of the Nobel Prize in economics, speaks about the honour on October 08, 2018, in New Haven, Connecticut, USA Yale University Professor William Nordhaus, one of the 2018 winners of the Nobel Prize in economics, speaks about the honour on October 08, 2018, in New Haven, Connecticut, USA

William Nordhaus from Yale University and Paul Romer of New York University's Stern Business School won the 2018 Nobel Prize for Economics. Their selections represent one of the most optimistically inclined selections for this particular award in recent times. The former has been clamouring for climate change attention for nearly as long as Bangladesh has been around, and the latter's studies on such 'internal things' as technological developments add other voices of concern to hold the tide against greenhouse effects and harness the directions that such outgrowths as artificial intelligence (AI) may take. At no other time since Nordhaus's 'integrated assessment models' helped us trace economic effects on the climate, and Romer's 'controls' on the human being's most formidable opponents have we needed to encourage contributions such as theirs for the sustenance of mankind.

If one recalls, as Bangladesh freedom fighters were seeking independence in 1971, some Nordic countries had already raised alarm about wetlands and ocean oil pollution. Clearly it was nothing but a fraction of the environmental climate-related challenges and damages we confront today. Yet, events as microscopic as these were sufficient to get sensitive economists at a truly turbulent economic moment to pay so much attention to our natural surroundings. One might say Nordhaus's publications in the early 1990s bombarded the need for a Kyoto Protocol-type agreement. When it came in 1997, we can see how and why Nordhaus played a small part of the raised consciousness. His Costs, Impacts, and Benefits of CO2 Mitigation in 1993, followed by Managing the Global Commons the next year; then the year after, Integrative Assessment of Mitigation, Impacts, and Adaptation to Climate Change, until, in 1996, his Climate Change literally bombarded those working for what would become the Kyoto agenda. Though he got heavy on the subject through his Efficient Use of Energy Resources in 1979, his first-ever book, ironically, was in Romer's domain: Innovation, Growth and Welfare: A Theoretical Treatment of Technological Change, in 1969.

Plucking the production function out of the Robert Solow-Trevor Swan model, highlighting capital, population, and production as factors behind long-run growth, Romer not only linked these with technology, but also reduced technology to the deliberate actions of individuals. For instance, both the research done to produce technology and the money poured into such exercises cannot but be deliberate. This linkage helped him make a case for 'internal things' (or 'endogenous growth') behind technology and technology-related developments.

Jumping from there he drew the conclusion that less developed countries could jumpstart economic growth by appropriating and harnessing the right kind of economic growth. His postulation directly fed the heart of neo-classical economics, making his works a simultaneously relevant outcome when the Cold War ended and the world turned into a fully-embraced neo-liberal order. Even more, the technological spurt, hitherto a glacially slow force, was just beginning to spurt in leaps and bounds, given the onset of the Internet-driven Third Industrial Revolution. With artificial intelligence (AI), Romer's contributions may begin to also spurt in leaps and bounds, yet still be reined in if we pay as much attention to controls as he was beginning to urgently recommend.

One case of this was inherent in his resignation from the World Bank this year, a year 'fake news' made headlines elsewhere, in which even Bangladesh got sucked in. This had to do with measuring the annual growth-rate. It is typically reported by the World Bank annually, as too each country, all on its own accord. Our own growth-rates have almost always diverged from those mentioned by the World Bank (or International Monetary Fund), and the difference is often attributed to methodological variations. Romer, the down-hearted neo-classic economist that he is, was not too enthused by Chile's recent growth rates, under Michelle Bachelet's tenure, and this might have resulted in the World Bank's lower Chilean estimates. After two years on the job, he resigned from the controversy generated by this interpretation. With the Nobel prize salvaging whatever may have been damaged by his resignation, we can be sure the government-wary World Bank's growth-rates formula may receive a boost.

Yet, AI implications may be what will propel him to the forefront faster and take him deeper. It is not only a product of bitter free-market competition, but that it supplies tools to make such competition bitter still is why Romer's works may not easily vanish from the headlines. As a developing country, Bangladesh is well-placed to profit by shifting to his growth-rate model by turning to more technological production. Were it not for our ready-made garment (RMG) competitiveness refusing to yield its top-notch in the global market, we might have explored technological possibilities further: robots to do the RMG labour-work have already been deployed in the United States. The time is right, ripe, and rewarding knowing that our 7+% of growth rate for two consecutive years (the highest in our history) is still not high enough to convert us into a developed country in another two decades: we have to go beyond 8.0 per cent average annually. Technology can really help boost production, though the social displacement costs will climb. Yet, if some other export-earning sectors do just as remarkably as the RMG counterpart, we have to take that plunge.

Even worse, we must take that plunge twice. On another front, climate-change dynamics pit Bangladesh as one of the five-most imperilled countries against ocean-water-rising. At ground-zero, the wisdom and words of Nordhaus can offer us the true consolation, again, if we are ready to take them. Remember, the more resources diverted towards environmental protection, the greater the economic constraint, just from the resources being rechannelled. This will be blatant immediately, which is why the fear to take that plunge. It remains for shrewd politicians to impress upon the people the wonders of long-term re-gauging our economic progress.

Apart from the United States, the home of these two economists (as, too, many others), Bangladesh should have a lot to be gleeful about with this year's selections. We could begin to familiarise ourselves with the specifics of what they argued, sift from the knowledge whatever we can apply at low-cost across the country, and simultaneously push the private sector to unleash its innovative capacities, technological substitutions, and market explorations, then hope these will, over the long-haul, make environment-friendly technological growth a prize-winning Bangladeshi formula.

Dr. Imtiaz A. Hussain is Professor & Head of the Department of Global Studies & Governance at Independent University, Bangladesh.

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