In scholarly work done more than three decades ago, economist Paul Romer proposed that societies look beyond the material drivers of long-term growth, such as oil, ports, or labor.
Nobel committee chair Per Stromberg told Reuters Monday's award was honoring research into "two big global questions": how to deal with the negative effects of growth on the climate and "to make sure that this economic growth leaves prosperity for everyone". The model showed that "the most efficient remedy for problems caused by greenhouse gases is a global scheme of universally imposed carbon taxes".
"If we set about making the policy changes that are required here, we can absolutely make substantial progress toward protecting the environment and do it without giving up the chance to sustain growth", Romer said via phone during a news conference.
At a news conference at Yale, Nordhaus suggested there is "pretty widespread acceptance" of climate change science outside the United States, and he expressed optimism that the nation would come around.
This year, two dozen conservative groups endorsed an estimate that a carbon tax would cost more than 500,000 manufacturing jobs by 2030. "Either I eat an apple of you eat the apple, but we can all use calculus", he said.
Governments have the power to promote or discourage innovation through policy.
But an idea - say, a recipe for Swedish meatballs - can be shared and used over and over again, delivering continual economic benefits.
Romer's career has taken him outside the academic world.
Romer was born in 1955 in Denver, Colorado, and earned his doctorate in 1983 from the University of Chicago.
A year ago the prize went to USA economist Richard Thaler, a co-founder of the so-called "nudge" theory, which demonstrates how people can be persuaded to make decisions that leave them healthier and happier.
Paul Romer, a former assistant professor of economics at the University of Rochester and now a professor at New York University, has been named a recipient of this year's Nobel Prize in Economic Sciences.
Meanwhile, Hubert Fromlet, a professor at Sweden's University of Vaxjo singled out several American women who could be honoured: Anne Krueger, the first woman named the deputy head of the International Monetary Fund, Susan Athey, known for her work on auctions and decision making under uncertainty, and Claudia Goldin, who researches gender inequality.
NYU Stern Professor of Economics Paul Romer won the Nobel Memorial Prize in Economic Science on Monday, becoming the first NYU professor to win a Nobel Prize in seven years. He was awarded the prize in economic sciences in 2007 when he was 90 years old.
Prof Romer won the prize for "integrating technological innovations into long-run macroeconomic analysis".
Congolese gynaecologist Denis Mukwege and Social Justice Warrior Nadia Murad received the prestigious Nobel Peace Prize "for their efforts to end the use of sexual violence as a weapon of war".