Economists William Nordhaus, Paul Romer win Nobel for work on sustainable growth

Americans William Nordhaus and Paul Romerhave won this year's Nobel Memorial Prize in economic sciences for their work in adapting economic theory to take betteraccount of environmental issues and technological progress.

In an award that turned the spotlight on the global debateover risks associated with climate change, the Royal Swedish Academy of Sciences said the laureates' work helped answerfundamental questions on how to promote long-term sustainablegrowth and enhance human welfare.

The prize took Romer, of New York University's Stern Schoolof Business, by surprise.

"I got two phone calls this morning, and I didn't answereither one because I thought it was some spam call, so I wasn'texpecting the prize," he said, while welcoming the chance toexpand on his theory.

"I think ... many people think that protecting theenvironment will be so costly and so hard that they just want toignore [this]," he told a news conference via phone link."We can absolutely make substantial progressprotecting the environment and do it without giving up thechance to sustain growth."

'Conclusive answers' on sustainability

Romer has shown how economic forces govern the willingness of firms to produce new ideas and innovations, laying the foundations for a new model for development, known as endogenous growth theory.

Nordhaus, of Yale University, was the first person to create a quantitative model that described the interplay between the economy and the climate, the Royal Swedish Academy of Sciences said on Monday.

"Their findings have significantly broadened the scope of economic analysis by constructing models that explain how the market economy interacts with nature and knowledge," the academy said in statement.

"We overslept and when we got up, I got a nice call from my daughter," Nordhaus told Reuters at his home in New Haven, Conn. "She said, 'Dad, you won. It's so nice.' It was a really lovely call. It's a nice way to find out."

He said he was being honoured for his work on carbon tax as a mechanism to reduce global warming.

"It was for work on one of the most important problems the globe faces, which is climate change," he said. "I've been working on that for almost 40 years, and the time's ripe."

Hours before the award, the United Nations panel on climatechangewarned of the risks of more frequent heat waves, floodsand drought in some regions as well as the loss of specieswithout a radical rethink in how societies operate.

Worth $1.31 million Cdn, the economics prize was established in 1968. It was not part of the original group of five awards set out in Swedish industrialist Alfred Nobel's 1895 will.

"This year's laureates do not deliver conclusive answers, but their findings have brought us considerably closer to answering the question of how we can achieve sustained and sustainable global economic growth," the academy said.

Romer's career has also taken him outside the academicworld. While on leave from the Stern School, he served as chiefeconomist and senior vice-president at the World Bank untilearly this year.

Nordhaus, whose research has included economic history, isalso known to have authored a study that before the U.S.-ledinvasion of Iraq predicted that costs for a war would reach ashigh as $2 trillion US.

Unusual year forNobels

The economics prize is the last of the Nobels announced this year.The prizes for medicine, physics, chemistry and peace were awarded last week.

This year's awards have stood out for two reasons.

Proceedings have been overshadowed by the absence of the literature prize, postponed to give the Swedish Academy time to restore public trust after a sexual assault scandal.

Three women have been awarded Nobel prizesan unusually large number for a single year.

With files from The Associated Press