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Portrait of William D. Nordhaus
Photo: Bengt Nyman, Flickr · CC BY 2.0 via Wikimedia Commons

Sveriges Riksbank Prize in Economic Sciences · 2018

William D. Nordhaus

He built the first models linking the economy to the climate, giving governments a way to put a price on carbon pollution.

The Nobel citation: “for integrating climate change into long-run macroeconomic analysis”
Born
May 31, 1941, Albuquerque, NM, USA
Shared with
Paul M. Romer
Affiliation at the time
Yale University, USA

Economics prize

2018

Shared with 1 other laureate.

Age that year

77years

Born in 1941.

Sources cited

17

Fact-checked September 24, 2026.

  • In 1975 he floated a 2 °C cap on warming as a rough first guess, 40 years before the 2015 Paris Agreement adopted that goal.
  • He liked the name DICE for his climate-economy model partly because it hints at the risk of gambling with the planet.
  • His first major DICE paper was turned down by economics journals and then published in the journal Science in 1992.
  • He co-wrote Paul Samuelson's famous textbook Economics from its 12th edition in 1985 onward, a book translated into 17 languages.
  • His great-grandfather was a rabbi in Paderborn, Germany, and his grandfather was a partner in one of New Mexico's largest merchant firms.

The breakthrough

The first models tying the global economy to the climate

When you burn gasoline, you pay for the fuel, but you do not pay for the damage its carbon dioxide will do to the climate years later. Economists call that hidden cost an externality. Nordhaus spent about two decades building computer models to measure it. His first try came in 1974 and 1975 at a research institute near Vienna, where he joined an energy model to simple equations for carbon dioxide. In 1977 he pointed out that the model's hidden price on carbon could be charged as a carbon tax. That idea later became known as the social cost of carbon. In 1992 he published DICE, the Dynamic Integrated model of Climate and the Economy. Think of it as a loop. The economy produces goods and emissions. Emissions warm the planet. Warming damages the economy. The model then asks how much to spend on cutting emissions today to avoid damage tomorrow. DICE links all these parts in a handful of equations, so anyone can test what a carbon tax or a temperature limit would do. Later versions split the world into regions, added uncertainty and new inventions, and modeled coalitions of countries. In 2015 he proposed a climate club: countries agree on a minimum carbon price and charge a small tariff on imports from countries that stay out.[2],[3],[4],[9]

“We cannot realistically set climate-change targets without considering both the costs of slowing climate change and benefits of avoiding the damages.”
William D. Nordhaus, Nordhaus quoting his own earlier writing in the autobiographical essay he wrote for the Nobel Foundation, 2018.[2]

What it meant for humanity

Nordhaus joined the physics and chemistry of climate change to economics, and turned it into something governments could put a price on. His DICE model, first published in 1992, links the economy, carbon emissions, warming and damage in one framework. Its developers describe it as the most widely used model of its kind. The United States government used DICE, alongside two other models, to set its official social cost of carbon in 2010: a dollar estimate of the harm done by each extra tonne of carbon dioxide. By 2017 that figure had been used in 69 final federal rules, from fuel-economy standards to energy-saving programs. Other governments have used DICE too. The idea behind the number goes back to Nordhaus's 1977 study, which showed that the hidden price of carbon in his model could be charged as a tax. He also helped economists measure well-being more honestly. In 1972 he and James Tobin published an early attempt at green accounting, a measure of welfare that went beyond GDP. His study of the history of lighting argued that official price statistics can miss how much new goods improve lives. His 2015 climate-club idea, a group of countries with a shared minimum carbon price and a small tariff on outsiders, is a design meant to stop countries from free-riding on others' efforts. Generations of students have also learned economics from the Samuelson-Nordhaus textbook.

  • The US government built its official social cost of carbon on three models, including DICE. By 2017 that value had been used in 69 final federal rules.[9],[10]
  • In 1977 he treated the model's hidden price on carbon as a carbon tax, an idea that later became the social cost of carbon at the heart of climate policy.[2],[4]
  • The Nobel committee called him the first person to build an integrated assessment model, a tool now widely used to test climate policies such as carbon taxes.[3]
  • With James Tobin he published 'Is Growth Obsolete?' (1972), an early attempt to measure economic welfare beyond GDP, a first step toward green accounting.[5],[13]
  • His 1996 study of the history of lighting argued that official price and wage statistics miss much of the gain in living standards that new goods bring.[16],[17]
  • His 2015 climate club proposal pairs a shared minimum carbon price with modest tariffs on non-members, so that countries have a reason to join.[2],[4]

Impact in numbers

Nordhaus's contribution is a way of thinking, not a product, so we give no numbers. Counting the benefits of US rules that used the social cost of carbon would be circular, because those benefits were calculated with that very number, and DICE shared the job with two other models. What can be said plainly: he was the first to join the economy and the climate in one model, and he turned the idea of a carbon price into something governments could calculate. DICE is described by its developers as the most widely used model of its kind, and the US and other governments have relied on it to value carbon pollution in their rules. His climate-club design gives countries a reason to act together rather than free-ride. His critics have used his own open-source model to argue for stronger action, which is itself a sign of how central the tool has become. His 2018 lecture was frank that the world's actual carbon price was still at most a tenth of what his model recommended.

EnvironmentEconomyEnergy

No number is given here on purpose. Some contributions cannot be counted honestly, and we would rather describe them than invent a figure.

The double edge

No physical harm flows from Nordhaus's work, but its policy advice is fiercely debated. For years his model's cost-benefit best path let the world warm by more than 3 °C by 2100, well above the Paris goals. Critics say this wrongly made the Paris goals look economically unjustified. In 2020 a team using an updated version of DICE found that, with newer climate science and damage estimates, the 2 °C goal can be economically justified under most experts' views on discounting. Nordhaus's own 2023 update lowered the model's recommended warming to 2.6 °C. Other critics, such as Steve Keen, argue that his damage estimates badly understate the risk and could be wrong by a factor of ten or more. How to weigh future generations, the so-called discount rate, is a third fight. Nordhaus rejected the low rate used in the UK's 2006 Stern Review, and his own lecture shows how much that choice matters. He has said openly that damage estimates remain highly uncertain.

  • Moderate

    A 'best' path with more than 3 °C of warming

    In his 2018 Nobel lecture, the cost-benefit best path in DICE rose above 3 °C by 2100, far above the 2 °C and 1.5 °C goals. A 2020 Nature Climate Change study said his analysis pointed to about 3.5 °C, and that an updated DICE supports the UN targets under most expert views on discounting. His own DICE-2023 update cut the recommended warming to 2.6 °C.[4],[9],[11]

  • Moderate

    Damage estimates called far too low

    Economist Steve Keen argued in 2020 that Nordhaus's smooth damage function misreads the scientific literature. He wrote that it assumes much economic activity is shielded from climate, and that true damages may be at least ten times larger. Nordhaus himself acknowledged that disputes over damage functions remain heated and that uncertainties have grown.[2],[12]

  • Minor

    The discount-rate dispute

    How much weight to give future generations changes the answer. Nordhaus criticised the 2006 Stern Review for its low discount rate, around 1% a year, and prefers a market-based rate near 5%. In his Nobel lecture he called discounting perhaps the most important conceptual issue in climate policy, since rates below 3% change the answer dramatically.[4],[13]

Against the odds

Nordhaus did not face persecution, and he has not described facing antisemitism himself. His family's story is one of Jewish immigrants who did well in the American Southwest. His grandfather Max came from Germany in 1883 and became a partner in the Charles Ilfeld Company, one of New Mexico's largest merchant firms. His father went to Yale and Yale Law School, fought in the Tenth Mountain Division in Italy in World War II, and became a lawyer in Albuquerque who won water and land cases for Native American nations. The wider picture was harsher. From 1923 into the early 1960s Yale kept an unacknowledged limit on Jewish students of about 10 percent. Yale's president believed he had ended it in the early 1950s, but the attitude lingered in the admissions office. Nordhaus entered Yale around 1959, as that era was ending. Other Ivy League schools used similar quotas from the 1920s, and they faded only slowly after World War II. Nordhaus went on to become Yale's provost and a Sterling Professor, the university's highest faculty rank.

  • 1959

    Quota

    Yale, where Nordhaus enrolled as an undergraduate around 1959, kept an unacknowledged cap of about 10 percent on Jewish students from 1923 into the early 1960s. No source says he was personally affected.[14],[15]

Jewish background

Jewish fatherRelationship to Jewish identity not documented

Nordhaus's father, Robert J. Nordhaus, came from a German-Jewish family in New Mexico, and Nordhaus himself describes his father as having a German-Jewish background. His grandfather Max Nordhaus left Paderborn, Germany, in 1883 to join the trading firm of his brother-in-law Charles Ilfeld, where he became a partner and second in command. Max's father was Rabbi Jacob Nordhaus of Paderborn, and Max married Anna Staab, daughter of the prominent merchant Abraham Staab. His mother, Virginia Riggs, is not described as Jewish in the sources we found. Nordhaus has not written publicly about his own religious life. His sister Betsy lives in Israel with her family.[2],[5],[6],[7],[8],[13]

Key dates

  1. 1883

    Grandfather Max Nordhaus, son of a Paderborn rabbi, emigrates from Germany to New Mexico to join the Charles Ilfeld Company.[7],[13]

  2. May 31, 1941

    Born in Albuquerque, New Mexico, the third of four children of lawyer Robert J. Nordhaus and Virginia Riggs Nordhaus.[1],[2],[13]

  3. 1963

    Graduates from Yale after a junior year at Sciences Po in Paris; begins graduate study in economics at MIT.[2],[5],[17]

  4. 1967

    Earns his PhD at MIT and returns to Yale as an assistant professor; he becomes a full professor in 1973.[1],[2],[5]

  5. 1972

    With James Tobin publishes 'Is Growth Obsolete?', an early measure of economic welfare beyond GDP.[5]

  6. 1974

    Spends a year at IIASA near Vienna and builds the first integrated model of climate-change economics.[2],[5]

  7. 1977

    Publishes the IIASA study, interpreting the model's carbon shadow price as a carbon tax. Joins President Carter's Council of Economic Advisers (1977-1979).[1],[2],[17]

  8. 1985

    Becomes co-author of Paul Samuelson's textbook Economics, starting with the 12th edition.[5],[13]

  9. 1986

    Serves as provost of Yale University until 1988.[17]

  10. 1992

    Publishes the DICE climate-economy model in Science after economics journals rejected it.[2]

  11. 2001

    Named Sterling Professor of Economics, Yale's highest faculty honor.[17]

  12. 2015

    Proposes the 'climate club' in his presidential address to the American Economic Association.[2]

  13. October 8, 2018

    Awarded the Nobel Memorial Prize in Economic Sciences with Paul Romer for integrating climate change into long-run macroeconomic analysis.[1],[3]

  14. 2024

    With Lint Barrage publishes DICE-2023, which lowers the model's recommended warming and raises its social cost of carbon.[9]

Sources

  1. 1.William D. Nordhaus – Facts – 2018 · NobelPrize.org, 2018
  2. 2.William D. Nordhaus – Biographical · NobelPrize.org, 2018
  3. 3.Press release: The Prize in Economic Sciences 2018 · The Royal Swedish Academy of Sciences / NobelPrize.org, 2018
  4. 4.Climate Change: The Ultimate Challenge for Economics (Nobel Prize Lecture) · NobelPrize.org, 2018
  5. 5.Profile of William D. Nordhaus (Regina Nuzzo), PNAS 103(26) · Proceedings of the National Academy of Sciences, 2006
  6. 6.US economist with Jewish roots shares Nobel Prize · Jewish Telegraphic Agency, 2018
  7. 7.The Ilfelds: A Family Story · Southwest Jewish Archives, University of Arizona
  8. 8.Bob Nordhaus: 10th vet, New Mexico pioneer · Skiing History (International Skiing History Association), 2007
  9. 9.Policies, projections, and the social cost of carbon: Results from the DICE-2023 model (Barrage and Nordhaus), PNAS 121(13) · Proceedings of the National Academy of Sciences, 2024
  10. 10.Q&A: The social cost of carbon · Carbon Brief, 2017
  11. 11.Climate economics support for the UN climate targets (Hänsel et al.), Nature Climate Change 10, 781-789 (accepted version) · London School of Economics Research Online, 2020
  12. 12.The appallingly bad neoclassical economics of climate change (Steve Keen), Globalizations · Taylor & Francis (author copy via Stanford MAHB), 2020
  13. 13.William Nordhaus · Wikipedia
  14. 14.Joining the Club: A History of Jews and Yale, by Dan A. Oren (review by Gideon Rose) · Commentary, 1986
  15. 15.How the Ivy League's Jewish quotas shaped higher education · Inside Higher Ed, 2022
  16. 16.Do Real-Output and Real-Wage Measures Capture Reality? The History of Lighting Suggests Not · NBER / University of Chicago Press (The Economics of New Goods), 1996
  17. 17.William Nordhaus wins 2018 Nobel Prize in Economic Sciences · Yale University Department of Economics, 2018

Fact-checked on September 24, 2026 by a separate AI fact-checking pass that re-opened the sources, with 9 corrections made. How we check

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