William D. Nordhaus

Yale University | YU · Department of Economics

Concerns about the impact on large-scale earth systems have taken center stage in the scientific and economic analysis of climate change. The present study analyzes the economic impact of a potential disintegration of the Greenland ice sheet (GIS). The study introduces an approach that combines long-run economic growth models, climate models, and r...

Many areas of the natural and social sciences involve complex systems that link together multiple sectors. Integrated assessment models (IAMs) are approaches that integrate knowledge from two or more domains into a single framework, and these are particularly important for climate change. One of the earliest IAMs for climate change was the DICE/RIC...

Significance This study develops estimates of uncertainty in projections of global and regional per-capita economic growth rates through 2100, comparing estimates from expert forecasts and an econometric approach designed to analyze long-run trends and variability. Estimates from both methods indicate substantially higher uncertainty than is assume...

Significance The most important single economic concept in the economics of climate change is the social cost of carbon (SCC). At present, regulations with more than $1 trillion of benefits have been written for the United States that use the SCC in their economic analysis. The DICE model (Dynamic Integrated model of Climate and the Economy) is one...

The present study analyses the new Visible Infrared Imaging Radiometer Suite (VIIRS) lights data to determine whether it can provide more accurate proxies for socioeconomic data in areas with poor quality data than proxies based on stable lights. Our analysis indicates that VIIRS lights are a promising supplementary source for standard measures on...

Notwithstanding great progress in scientific and economic understanding of climate change, it has proven difficult to forge international agreements because of free-riding, as seen in the defunct Kyoto Protocol. This study examines the club as a model for international climate policy. Based on economic theory and empirical modeling, it finds that w...

Should governments use a discount rate that declines over time when evaluating the future benefits and costs of public projects? The argument for using a declining discount rate (DDR) is simple: if the discount rates that will be applied in the future are uncertain but positively correlated, and if the analyst can assign probabilities to these disc...

Much aggregate social-science analysis relies upon the standard national income and product accounts as a source of economic data. These are recognized to be defective in many poor countries, and are missing at the regional level for large parts of the world. Using updated luminosity (or nighttime lights) data, the present study examines whether su...

The social cost of carbon (SCC) is an important concept for understanding and implementing climate change policies. This term represents the economic cost caused by an additional ton of carbon dioxide emissions (or more succinctly carbon) or its equivalent. The present study describes the development of the concept, provides examples of its use in...

In September 2011, the US Environmental Protection Agency asked 12 economists how the benefits and costs of regulations should be discounted for projects that affect future generations. This paper summarizes the views of the panel on three topics: the use of the Ramsey formula as an organizing principle for determining discount rates over long hori...

The United States and others should consider adopting a different approach to estimating costs and benefits in light of uncertainty.

In economic project analysis, the rate at which future benefits and costs are discounted relative to current values often determines whether a project passes the benefit-cost test. This is especially true of projects with long time horizons, such as those to reduce greenhouse gas (GHG) emissions. Whether the benefits of climate policies, which can...

The U.S. Congress charged the National Academies with conducting a review of the Internal Revenue Code to identify the types of and specific tax provisions that have the largest effects on carbon and other greenhouse gas emissions and to estimate the magnitude of those effects. To address such a broad charge, the National Academies appointed a comm...

We consider the influence of countries' external security environments on their military spending. We first estimate the ex ante probability that a country will become involved in a fatal militarized interstate dispute using a model of dyadic conflict that incorporates key elements of liberal and realist theories of international relations. We then...

Previous work has analyzed whether luminosity data contain useful information for estimating economic output and concluded that there was significant promise for regions with poor quality economic statistics. The present paper examines alternative measures of the precision of the estimates using bootstrap and prior estimates of the errors for both...

From time to time, something occurs which is outside the range of normal expectations. We will call these "tail events" in the sense that they are way out of the tail of a probabil-ity distribution. I consider the question of the implications of tail events for economic policy and climate-change eco-nomics. This issue has been analyzed by Martin We...

This survey examines the history and current practice in integrated assessment models (IAMs) of the economics of climate change. It begins with a review of the emerging problem of climate change. The next section provides a brief sketch of the rise of IAMs in the 1970s and beyond. The subsequent section is an extended exposition of one IAM, the DIC...

A new and important concept in global warming economics and policy is the social cost of carbon or SCC. This concept represents the economic cost caused by an additional ton of carbon-dioxide emissions or its equivalent. The present study describes the development of the concept as well as its analytical background. We estimate the SCC using an upd...

From time to time, something occurs that is outside the range of what is normally expected. This is called a tail event in the sense that it is way out the tail of a probability distribution. This article considers the implications of tail events for economic policy and climate change economics. This issue has been analyzed by Martin Weitzman, who...

This study presents a framework to include environmental externalities into a system of national accounts. The paper estimates the air pollution damages for each industry in the United States. An integrated-assessment model quantifies the marginal damages of air pollution emissions for the US which are multiplied times the quantity of emissions by...

What is the best strategy to encourage research and development on new energy technologies in a market economy? What steps can ensure a rapid and efficient transition to an economy that has much lower net carbon emissions? This paper shows that, under limited conditions, a necessary and sufficient condition for an appropriate innovational environme...

A pervasive issue in social and environmental research has been how to improve the quality of socioeconomic data in developing countries. Given the shortcomings of standard sources, the present study examines luminosity (measures of nighttime lights visible from space) as a proxy for standard measures of output (gross domestic product). We compare...

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The science of global warming has reached a consensus on the high likelihood of substantial warming over the coming century. Nations have taken but limited steps to reduce greenhouse gas emissions since the first agreement at Kyoto in 1997, and little progress was made at the Copenhagen meeting in December 2009. The present study examines alternati...

The natural sciences are doing an admirable job of describing the geophysical aspects of climate change. The science behind global warming is well established. But designing an effective political and economic strategy to control climate change will require the second culture-the social sciences-to analyze how to harness our economic and political...

In his review of A New Architecture for the U.S. National Accounts (Jorgenson et al., 2006), published in this issue (Vanoli, 2010), André Vanoli: • Suggests that the methods for integrating and increasing the consistency of national accounts contained in the New Architecture volume and in the recent United Nations (UN) Friends of the Chair Working...

In a letter to colleagues, Myron Gutmann, Assistant Director of the National Science Foundation, invited people “to contribute white papers outlining grand challenge questions that are both foundational and transformative.” This paper will address some foundational issues that cross the boundaries of many social and natural science: the issue of ho...

The science of global warming has reached a consensus on the high likelihood of substantial warming over the coming century. Nations have taken only limited steps to reduce greenhouse gas emissions since the first agreement in Kyoto in 1997, and little progress was made at the Copenhagen meeting in December 2009. The present study examines alternat...

This study examines the economic impacts of US hurricanes. The major conclusions are the following: First, there are substantial vulnerabilities to intense hurricanes in the Atlantic coastal United States. Damages appear to rise with the ninth power of maximum wind speed. Second, greenhouse warming is likely to lead to stronger hurricanes, but the...

A carbon tax would improve fiscal sustainability in the United States according to William Nordhaus of Yale University. There is no better fiscal instrument to employ at this time, in this country, and given the fiscal constraints the government faces.

One of the pervasive issues in social and environmental research has been to improve the quality of socioeconomic data in developing countries. Because of the shortcoming of standard data sources, the present study examines luminosity (measures of nighttime lights) as a proxy for standard measures of output. The paper compares output and luminosity...

Countries' military expenditures differ greatly across both space and time. This study examines the determinants of military spending, with particular reference to the importance of the external security environment. Using the liberal-realist model of international relations, we first estimate the probability that two countries will be involved in...

One of the important features of public "bads" like global warming is that countries face widely disparate incentives to participate in measures to mitigate the impacts.1 In the specific case of global warming, these differences in incentives reflect differences in income, political structure, environmental attitudes, country size, geography, and p...

In a series of papers, Martin Weitzman has proposed a Dismal Theorem. The general idea is that, under limited conditions concerning the structure of uncertainty and preferences, society has an indefinitely large expected loss from high-consequence, low-probability events. Under such conditions, standard economic analysis cannot be applied. The pres...

Learning or experience curves are widely used to estimate cost functions in manufacturing modeling. They have recently been introduced in policy models of energy and global warming economics to make the process of technological change endogenous. It is not widely appreciated that this is a dangerous modeling strategy. The present note has three poi...

Past studies of the relationships between economic activity and geography have been hampered by limited spatial data on economic activity. This study presents revised data on global economic activity, the G-Econ database, which measures economic activity for the entire globe, measured at a 1° latitude by 1° longitude scale. The methodologies for...

This paper discusses the results of an indepth interview survey of experts, both social and natural scientists, about estimates of the economic impact of potential greenhouse warming. The range of estimate impacts was enormous as was the difference between disciplines, particularly mainstream economists and natural scientists. The nineteen survey p...

Addressing global warming involves not only understanding the science of climate change but also designing effective economic instruments to provide appropriate incentives for nations to join agreements and for market participants. There are three major lessons from economics about climate-change policies. First, raising the price of carbon is a ne...

Version française,traduction de la 11e éd.de l'original anglais de P.A.Samuelson.Edición española traducida de la 5ª edición original

The present paper examines several issues involved in expanding national economic accounts and quantitative social indicators to include the "consumption" of time. The first part examines this question in the context of the standard national economic accounts. It derives equilibrium conditions for consumer behavior with market and non-market consum...

The present study extends earlier research by presenting the results of a new and updated version of the RICE model (Regional Integrated model of Climate and the Economy), labeled the RICE-2009 model. The model is a regionalized, dynamic model that incorporates an end-to-end treatment of economic growth, emissions, climate change, damages, and emis...

The economic growth of South Africa has been disappointing over the last quarter century. This note addresses a conceptual problem that arises because of composition effects. Two important features of the South African economy are, first, its extreme inequality (primarily between the white population and the African population). Additionally, the A...

William Baumol and his co-authors have analyzed the impact of differential productivity growth on the health of different sectors and on the overall economy. They argued that technologically stagnant sectors experience above average cost and price increases, take a rising share of national output, and slow aggregate productivity growth. Using indus...

This very nice paper is filled with interesting facts about firms in developing countries: about the size of the informal economy (around half that of the formal sector, on average); about the extent of theft among both small and large firms (less than 5 percent of sales); and about the number of days per year that firms face power outages (around...

This paper reviews different approaches to the political and economic control of global public goods like global warming. It compares quantity-oriented control mechanisms like the Kyoto Protocol with price-type control mechanisms such as internationally harmonized carbon taxes. The pros and cons of the two approaches are compared, focusing on such...

The last two decades have witnessed a dramatic growth in interest in the interaction between economic activity and geophysical variables. A major hurdle for current research is the complete disjunction of socioeco- nomic and geophysical data. The present study describes the results of the GEcon project, which has developed a geophysically based dat...

¿Cómo enfrentar el calentamiento global? ¿Qué opciones de política se están proponiendo? ¿Cuáles son sus pros y contras desde el punto de vista de la generación actual y qué tensiones surgen cuando se considera el bienestar de las generaciones futuras? En las páginas que siguen se recogen distintas opiniones. Para comenzar se reproduce el ensayo de...

As scientific and observational evidence on global warming piles up every day, questions of economic policy in this central environmental topic have taken center stage. But as author and prominent Yale economist William Nordhaus observes, the issues involved in understanding global warming and slowing its harmful effects are complex and cross disci...

This study reviews different approaches to the political and economic control of global public goods such as global warming. It compares quantity-oriented control mechanisms like the Kyoto Protocol with price-type control mechanisms such as internationally harmonized carbon taxes. The analysis focuses on such issues as the relationship to ultimate...

The Stern Review's analysis of global-warming economics depends on an extreme view of economic discounting.

The study examines the question of the use of purchasing power parity versus market exchange rates in constructing global economic models. It compares three approaches: MER accounts, world-price PPP accounts, and superlative PPP accounts. It concludes that the best approach is to use superlative PPP accounts. This approach uses cross-sectional PPP...

The present study analyzes computer performance over the last century and a half. Three results stand out. First, there has been a phenomenal increase in computer power over the twentieth century. Depending upon the standard used, computer performance has improved since manual computing by a factor between 1.7 trillion and 76 trillion. Second, ther...

How much and how fast should we react to the threat of global warming? The Stern Review argues that the damages from climate change are large, and that nations should undertake sharp and immediate reductions in greenhouse gas emissions. An examination of the Review 's radical revision of the economics of climate change finds, however, that it depen...

This paper provides two new methods and data for tracking and evaluating changes in time allocation. The first method uses cluster analysis to assign activities to categories based on six dimensions of participants' reported affective experiences (feeling interested, stressed, happy, tired, sad, pain) during those activities. The second method uses...

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How much and how fast should the globe reduce greenhouse-gas emissions? How should nations balance the costs of the reductions against the damages and dangers of climate change? This question has been addressed by the recent "Stern Review on the Economics of Climate Change," which answers these questions clearly and unambiguously. We need urgent, s...

provided extraordinary help with research on computer history.

The present study describes a project that has developed a geophysically based data set on economic activity. The project is called the Yale G-Econ project (for Geographically based Economic data). The G-Econ data set calculates gross value added at a 1-degree longitude by 1-degree latitude resolution at a global scale for all terrestrial cells. Th...

The linkage between economic activity and geography is obvious: Populations cluster mainly on coasts and rarely on ice sheets. Past studies of the relationships between economic activity and geography have been hampered by limited spatial data on economic activity. The present study introduces data on global economic activity, the G-Econ database,...

The linkage between economic activity and geography is obvious: Populations cluster mainly on coasts and rarely on ice sheets. Past studies of the relationships between economic activity and geography have been hampered by limited spatial data on economic activity. The present study introduces data on global economic activity, the G-Econ database,...

This paper discusses the issues of technological transfers aimed at reducing GHG mitigation costs under various assumptions. In a new version of RICE model, we introduce technological transfer mechanism that donors' monetary transfers go to recipients' GHG mitigation. Through such transfer mechanism, we examine the relationships between magnitude/d...

A New Architecture for the U.S. National Accounts brings together a distinguished group of contributors to initiate the development of a comprehensive and fully integrated set of United States national accounts. The purpose of the new architecture is not only to integrate the existing systems of accounts, but also to identify gaps and inconsistenci...

This study reviews different approaches to the political and economic control of global public goods like global warming. It compares quantity-oriented control mechanisms like the Kyoto Protocol with price-type control mechanisms such as internationally harmonized carbon taxes. The pros and cons of the two approaches are compared, focusing on such...

The year 2005 brought record numbers of hurricanes and storm damages to the United States. Was this a foretaste of increasingly destructive hurricanes in an era of global warming? This study examines the economic impacts of U.S. hurricanes. The major conclusions are the following: First, there appears to be an increase in the frequency and intensit...

Productivity has rebounded in the last decade while manufacturing employment has declined sharply. The present study uses data on industrial output and employment to examine the sources of these trends. It finds that the productivity rebound since 1995 has been widespread, with approximately two-fifths of the productivity rebound occurring in New E...

The present study examines the importance of Schumpeterian profits in the United States economy. Schumpeterian profits are defined as those profits that arise when firms are able to appropriate the returns from innovative activity. The paper derives the underlying equations for Schumpeterian profits. It then estimates the value of these profits for...

In the wake of the 2004 election, Democrats are weighing their strategies and considering whether to refashion themselves after the victors. If the election is seen as a sweeping rejection of Democratic prospects and values, some have advised the Democrats to reshape their fundamental beliefs. A careful look at underlying economic and political fun...

The distinction between public and private goods follows from concerns about the concepts of market efficiency. This chapter fits in with the appraisal of polar cases of fact from an epistemological appraisal point of view. It argues that a public good for which the cost of extending the service to an additional person is zero, is a polar case of a...

The 2004 election has been interpreted as a resounding victory for conservative values. Was it in fact a mandate? The present analysis examines recent electoral outcomes and the 2004 election with particular reference to economic and political fundamentals. Looking at both aggregate results and exit polls since 1972, it examines three models of per...

It is not widely recognized that conventional measures of national income and output exclude the value of improvements in the health status of the population. The present study discusses the theory of the measurement of national income, proposes a new concept called "health income" that can be used to incorporate improvements in health status, and...

It is not widely recognized that conventional measures of national income and output exclude the value of improvements in the health status of the population. The present study discusses the theory of the measurement of national income, proposes a new concept called "health income" that can be used to incorporate improvements in health status, and...

The present study analyzes the "productivity slowdown" of the 1970s. The study also develops a new data set -- industrial data available back to 1948 -- as well as a new set of tools for decomposing changes in productivity growth. The major result of this study is that the productivity slowdown of the 1970s has survived three decades of scrutiny, c...

The present study examines the importance of Schumpeterian profits in the United States economy. Schumpeterian profits are defined as those profits that arise when firms are able to appropriate the returns from innovative activity. We first show the underlying equations for Schumpeterian profits. We then estimate the value of these profits for the...

The present study reviews the "productivity slowdown" of the 1970s and 1980s. The study also develops a new data set -- industrial data available back to 1948 -- as well as a new set of tools for decomposing changes in productivity growth. The major result of this study is that the productivity slowdown of the 1970s has survived three decades of sc...

Large, abrupt, and widespread climate changes with major impacts have occurred repeatedly in the past, when the Earth system was forced across thresholds. Although abrupt climate changes can occur for many reasons, it is conceivable that human forcing of climate change is increasing the probability of large, abrupt events. Were such an event to rec...

EE UU centra su política exterior en Irak. La obsesión de Bush distrae a la opinión pública de otros asuntos como Oriente Próximo o Corea del Norte. La ralentización del crecimiento, la crisis de las empresas y los crecientes problemas de la sanidad ponen en peligro la economía del país.

Much has been written about the national-security aspects of a potential conflict in Iraq, but there are no studies of the cost. A review of several past wars indicates that nations historically have consistently underestimated the cost of military conflicts. This study reviews the potential costs of a conflict including the postwar expenses that m...

This paper examines the state of the United States economy as it emerges from the 2001 recession. A comparison of several central economic variables indicates that the 2001 recession was the mildest recession in the postwar period. In light of highly differentiated characteristics of recessions, the paper suggests that we differentiate among downtu...

Nations generally measure their economic performance using the yardstick of national output and income. It is not widely recognized, however, that conventional measures of national income and output exclude the value of improvements in the health status of the population. The present study develops a methodology and presents preliminary estimates o...

The present study is the third in a series of three papers devoted to issues in the measurement of productivity and productivity growth. The major findings are as follows. First, this study shows that the new data set used here, which develops data on total output, business sector output, and 'well-measured' output, and relying on income-side data,...

A SO FAPRIL 2002 THE signs of economic recovery are sprouting like spring flowers. The United States has emerged from the short but painful winter that followed the burst of the asset bubble in early 2000 and the anxiety caused by the events of September 11 and the anthrax scare in the fall of 2001. This report addresses the current state of the ec...

In these comments, we argue that the Revised Proposed Final Judgement (RPFJ) is not in the "public interest," as that test is applied under the Tunney Act. Accordingly, the RPFJ should either be rejected outright now, or the court should refrain from ruling on the RPFJ until it has completed its further factual inquiry regarding the remedy proposed...

Under the recent revision of the Kyoto Protocol at Bonn, Germany, countries decided to move ahead with policies to slow greenhouse warming without the United States. Using the RICE-2001 model, the author of this Policy Forum shows that the revised protocol will have little impact on greenhouse-gas emissions and that the economic burden shifts sharp...

The present study analyzes computer performance over the last century and a half. Three results stand out. First, there has been a phenomenal increase in computer power over the twentieth century. Performance in constant dollars or in terms of labor units has improved since 1900 by a factor in the order of 1 trillion to 5 trillion, which represent...