ECONOMICS MADE SIMPLE : 2018 Nobel Prize in economics and its relevance for Tanzania

What you need to know:

For 2018 the Nobel Prize in economics was awarded to William D. Nordhaus and Paul M. Romer. In what follows, the prize is discussed with a focus on its relevance for Tanzania.

The 2018 Nobel Prize in Economics was announced on 8th October 2018. At the figure of nine million Swedish krona, it was divided equally to two laureates. These are William D. Nordhaus of Yale University in USA for integrating climate change into long-run macroeconomic analysis and Paul M. Romer of NYU Stern School of Business USA for integrating technological innovations into long-run macroeconomic analysis. The duo has designed methods for addressing most basic and pressing questions on how to create long-term sustained and sustainable economic growth. They have broadened the scope of economic analysis by constructing models that explain how the market economy interacts with nature and knowledge. The issues behind their studies leading to the prestigious award are of great relevance and day to day discussion in Tanzania and beyond as partly outlined in what follows.

Technology and its changes are very important for economic growth in Tanzania. Romer demonstrates how knowledge can function as a driver of long-term economic growth. Annual economic growth of a few per cent can accumulate for a long period of time, say decades. This can transform people’s lives. Earlier studies in macroeconomics had emphasized technological innovation as the primary driver of economic growth. However, they had not modelled how economic decisions and market conditions determine the creation of new technologies. The 2018 Nobel laureate Romer solved this problem. He demonstrated the way economic forces govern the willingness of firms to produce new ideas and innovations. He explains the way ideas are different from other goods and require specific conditions to thrive in a market. He has stimulated new research on regulations and policies that encourage new ideas and long-term prosperity.

ECONOMICS MADE SIMPLE : 2018 Nobel Prize in economics and its relevance for Tanzania

What you need to know:

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