William Nordhaus, 1941-2026

I was saddened to hear of the passing of William Nordhaus last Friday. Nordhaus won the Nobel Prize in 2018 "for integrating climate change into long-run macroeconomic analysis", and it is his work on climate change and economics that he might be best known for. However, that was far from his only contribution to economics. My ECONS102 students might recognise Nordhaus as one of the first economists to formally analyse the tradeoff between strong intellectual property rights, which provide incentives for creation, but lead to under-consumption, and weak intellectual property rights, which can lead to optimal consumption, but lead to under-investment in idea creation (for more on that tradeoff, see this post).

My favourite Nordhaus contribution was actually some work he did on the change in the cost of light over time. The original research paper is available here, but the story is best told in this article from the BBC:

Back in the mid-1990s, an economist called William Nordhaus conducted a series of simple experiments with light.

First, he used a prehistoric technology: he lit a wood fire.

But Prof Nordhaus also had a piece of hi-tech equipment with him - a Minolta light meter.

He burned 20lb (9kg) of wood, kept track of how long it burned for and carefully recorded the dim, flickering firelight with his meter.

Next, he bought a Roman oil lamp, fitted it with a wick, and filled it with cold-pressed sesame oil.

He lit the lamp and watched the oil burn down, again using the light meter to measure its soft, even glow.

Bill Nordhaus's open wood fire had burned for just three hours on 9kg of wood.

But a mere eggcup of oil burned all day, and more brightly and controllably.

Why did he do this?

He wanted to understand the economic significance of the light bulb.

His research showed just how dramatic the fall in the cost of light was. Drawing on his work, the same BBC article notes that 60 hours of labour:

...had once produced the equivalent of 54 minutes of quality light [but] now produced 52 years.

That fact demonstrates just how powerful technological progress and economic growth have been over the very long run. But Nordhaus's deeper insight was that simply looking at prices and economic growth alone can lead us to miss the enormous improvements in living standards. The significance of that cannot be overstated.

I'm surprised that there doesn't appear to have been much coverage of Nordhaus's passing. Nevertheless, Yale News has a good obituary. And while searching for some others, I ran across this podcast from earlier last month, that neatly covers his life in the way a good obituary would.

Nordhaus's work extended far beyond the climate economics he is most known for. His research on the cost of light is a reminder that seemingly ordinary things can nevertheless tell important stories. He will be missed.