William D Nordhaus and Paul M Romer have won the 2018 Sveriges Riksbank Prize in Economic Sciences, the Royal Swedish Academy of Sciences announced on Monday. Both of them are from the United States.

Although the Prize in Economic Sciences is not a Nobel Prize, it is awarded according to the principles that are followed when handing out the other Nobel Prizes. The prize is awarded in the memory of Swedish inventor Alfred Nobel.

Nordhaus got the award for his work on climate economics, and Romer for his work on the endogenous growth theory. They have designed methods that “address some of our time’s most fundamental and pressing issues: long-term sustainable growth in the global economy and the welfare of the world’s population”, the academy said.

The academy said Nordhaus was honoured for “integrating climate change into long-run macroeconomic analysis” and Romer for “integrating technological innovations into long-run macro-economic analysis”.

“Nordhaus’ research shows that the most efficient remedy for problems caused by greenhouse gas emissions is a global scheme of carbon taxes uniformly imposed on all countries,” the academy said. The statement said Nordhaus was the first person to create a quantitative model that describes the global interplay between the economy and the climate.

“His model is now widespread and is used to examine the consequences of climate policy interventions, for example carbon taxes,” the statement said. “His research shows how economic activity interacts with basic chemistry and physics to produce climate change.”

Romer’s research, the academy said, depicts how the collection of ideas sustains long-term economic growth. Romer showed how “economic forces govern the willingness of firms to produce new ideas and innovations”.

Romer’s research paved the way for endogenous growth theory, the academy said. “The theory has generated vast amounts of new research into the regulations and policies that encourage new ideas and long-term prosperity.”

Last year, the Sveriges Riksbank Prize in Economic Science was awarded to Dr Richard H Thaler for his contributions to behavioural economics. Thaler is a professor of Behavioural Science and Economics at the University of Chicago in the United States.

Last week, the Nobel Prize for Physics was awarded to Arthur Ashkin, Gérard Mourou and Donna Strickland for advances in the field of laser physics, while the Nobel Prize in Physiology or Medicine was awarded jointly to James P Allison and Tasuku Honjo for their “discovery of cancer therapy by inhibition of negative immune regulation”.

On Friday, Yazidi Kurdish human rights activist Nadia Murad and gynaecologist Denis Mukwege from Democratic Republic of Congo were declared winners of the Nobel Peace Prize for 2018.