|Chief Economist of the World Bank|
October 2016 – 24 January 2018
|President||Jim Yong Kim|
|Preceded by||Kaushik Basu|
|Succeeded by||Shanta Devarajan (Acting)|
Paul Michael Romer
November 6, 1955
Denver, Colorado, U.S.
|Education||Phillips Exeter Academy
University of Chicago (BSc, MA, PhD)|
Massachusetts Institute of Technology
|Awards||Nobel Memorial Prize in Economic Sciences (2018)|
|Institutions||New York University|
University of Chicago
University of Rochester
|Thesis||Dynamic competitive equilibria with externalities, increasing returns and unbounded growth (1983)|
|Doctoral advisor||José Scheinkman|
Robert Lucas Jr.
|Other academic advisors||Russell Davidson|
|Doctoral students||Sérgio Rebelo|
Paul Michael Romer (born November 6, 1955) is an American economist, a pioneer of endogenous growth theory, and a co-recipient of the 2018 Nobel Memorial Prize in Economic Sciences. He received the prize "for integrating technological innovations into long-run macroeconomic analysis".
Romer was Chief Economist and Senior Vice President of the World Bank until he resigned in January 2018 following a controversy arising from his claim of possible political manipulation of Chile's "ease of doing business" ranking. He had been on leave from his position as professor of economics at the Stern School of Business at New York University.
Prior to New York University, Romer was a professor of economics at the University of Chicago, the University of California, Berkeley, the Stanford University's Graduate School of Business, and the University of Rochester. In addition, he was a senior fellow at Stanford's Center for International Development, the Stanford Institute for Economic Policy Research, the Hoover Institution, as well as a fellow at the Center for Global Development.
Early life and education
He graduated from Phillips Exeter Academy, and earned a B.S. in mathematics in 1977 and a MA in economics in 1978 as well as a Ph.D. in economics in 1983, all from the University of Chicago, after graduate studies at Massachusetts Institute of Technology and Queen's University.
Romer's most important work is in the field of economic growth, and he has made vital contributions in the development of endogenous growth theory. He was named one of America's 25 most influential people by Time magazine in 1997, and he was awarded the Horst Claus Recktenwald Prize in Economics in 2002.
Romer's research on economic growth followed extensive studies of long-run growth during the 1950s and 1960s. The Solow–Swan model, for example, established the primacy of technological progress in accounting for sustained increases in output per worker. His 1983 dissertation, supervised by José Scheinkman and Robert Lucas Jr., amounted to constructing mathematical representations of economies in which technological change is the result of the intentional actions of people, such as research and development. It led to two Journal of Political Economy articles published in 1986 and 1990, respectively, which started endogenous growth theory.
He is credited with the quote "A crisis is a terrible thing to waste," which he said during a November 2004 venture-capitalist meeting in California. Although he was referring to the rapidly rising education levels in other countries compared to the United States, the quote became a rallying concept for economists and consultants looking for constructive opportunities amid the Great Recession.
Romer has attempted to replicate the success of charter cities and make them an engine of economic growth in developing countries. He promoted this idea in a TED talk in 2009, and he has argued that with better rules and institutions less developed nations can be set on a different and better trajectory for growth. In his model, a host country would turn responsibility for a charter city over to a more developed trustee nation, which would allow for new rules of governance to emerge. People could "vote with their feet" for or against these rules.
The government of Honduras considered creating charter cities, though without the oversight of a third-party government, which some argue is neo-colonialism. Romer served as chair of a "transparency committee" but resigned in September 2012 when the Honduran government agency responsible for the project signed agreements with international developers without involvement of the committee.
He became World Bank Chief Economist in October 2016. He resigned on 24 January 2018, following a controversy in which he stated in an interview with The Wall Street Journal on January 12, that during the tenure of Chile's socialist President Michelle Bachelet from 2014 onwards, Chile's ranking for ease of doing business had been downgraded by the World Bank as a result of changes of methodology which he claimed may have been politically motivated, a claim denied by the former World Bank economist responsible for compiling Chile's ranking, Chilean economist Augusto Lopez-Claros.
Nobel Memorial Prize in Economics
Romer shared the 2018 Nobel Prize with William Nordhaus. In choosing Romer as one of the 2018 economics laureates, the Royal Swedish Academy of Sciences stated that he had shown "how knowledge can function as a driver of long-term economic growth. . . . [Prior macroeconomic studies] had not modelled how economic decisions and market conditions determine the creation of new technologies. Paul Romer solved this problem by demonstrating how economic forces govern the willingness of firms to produce new ideas and innovations."
After receiving the prize, Romer described how he started thinking about the relationship between growth and innovation: "The question that I first asked was, why was progress . . . speeding up over time? It arises because of this special characteristic of an idea, which is if [a million people try] to discover something, if any one person finds it, everybody can use the idea."
The same day he received the Nobel award, Romer married Caroline Weber, a professor of French Literature at Barnard College.
- "Growth Cycles", with George Evans and Seppo Honkapohja (American Economic Review, June 1998). JSTOR 116846
- "Preferences, Promises, and the Politics of Entitlement" (Individual and Social Responsibility: Child Care, Education, Medical Care, and Long-Term Care in America, Victor R. Fuchs (ed.), Chicago: University of Chicago Press, 1995).
- "New Goods, Old Theory, and the Welfare Costs of Trade Restrictions," Journal of Development Economics, No. 43 (1994), pp. 5–38.
- "Looting: The Economic Underworld of Bankruptcy for Profit" with George Akerlof (Brookings Papers on Economic Activity 2, William C. Brainard and George L. Perry (eds.), 1993, pp. 1–74). JSTOR 2534564
- "Economic Integration and Endogenous Growth," with Luis Rivera-Batiz (Quarterly Journal of Economics CVI, May 1991, pp. 531–55). JSTOR 2937946
- "Endogenous Technological Change" (Journal of Political Economy, October 1990). JSTOR 2937632
- "Increasing Returns and Long Run Growth" (Journal of Political Economy, October 1986). JSTOR 1833190
- "Cake Eating, Chattering and Jumps: Existence Results for Variational Problems" (Econometrica 54, July 1986, pp. 897–908). JSTOR 1912842
- Romer, Paul Michael (1983). Dynamic competitive equilibria with externalities, increasing returns and unbounded growth (Ph.D.). The University of Chicago. OCLC 28795806 – via ProQuest. (Subscription required (help)).
- "The Prize in Economic Sciences 2018 Press Release" (PDF). Nobelprize.org. October 8, 2018.
- Donnan, Shawn (January 25, 2018). "Outspoken World Bank chief economist Paul Romer exits: Emails reveal clashes over issues ranging from grammar to methodology". Financial Times.
- "World Bank economist Paul Romer quits after Chile comments". Reuters. 24 January 2018. Retrieved 8 October 2018.
- "N.Y.U. Lands Top Economist for Cities Project". New York Times. 2011-05-27. Retrieved 2011-05-27.
- "CV (PAUL M. ROMER)" (PDF).
- "Paul Romer". paulromer.net. Retrieved 2018-10-08.
- "Risk and Return". Hoover Digest. No. 2. 1996. Archived from the original on 2012-08-02.
- "The Politically Incorrect Guide to Ending Poverty". The Atlantic. July–August 2010.
- Warsh, David (2007). Knowledge and the Wealth of Nations. New York: Norton. pp. 196–201. ISBN 978-0-393-32988-9.
- "Time's 25 Most Influential Americans". Time Magazine. Time Inc. 1997-04-21. Retrieved 2007-12-21.
- Solow, Robert M. (1994). "Perspectives on Growth Theory". Journal of Economic Perspectives. 8 (1): 45–54. doi:10.1257/jep.8.1.45. JSTOR 2138150.
- Rosenthal, Jack (2009-07-31). "A Terrible Thing to Waste". The New York Times. Retrieved 2011-10-09.
- Paul Romer: Why the world needs charter cities, TED talk August 2009
- Gunn, Dwyer (2009-09-29). "Can "Charter Cities" Change the World? A Q&A With Paul Romer". The New York Times. Retrieved 2010-05-22.
- "Plan for Charter City to Fight Honduras Poverty Loses Its Initiator". New York Times. 30 September 2012.
- Josh Zumbrun; Ian Talley (12 January 2018). "World Bank Unfairly Influenced Its Own Competitiveness Rankings". Wall Street Journal. Retrieved 8 October 2018.
- "Chile complains of World Bank unfair treatment". BBC. 15 January 2018. Retrieved 8 October 2018.
In an interview given to the Chilean newspaper El Mercurio, the World Bank economist who had been responsible for the rankings, Augusto Lopez-Claros, said changes in methodology "took place in a transparent and open context," denying any political bias.
- Oscar Medina; Andrew Rosati (13 January 2018). "World Bank to Probe Chile's Business Ranking After Bias Alleged". Bloomberg. Retrieved 8 October 2018.
Chilean economist Augusto Lopez-Claros, who was in charge of compiling Chile’s ranking for the World Bank report, said accusations of political manipulation were “wholly without merit.”
- Appelbaum, Binyamin (October 8, 2018). "2018 Nobel in Economics Awarded to William Nordhaus and Paul Romer". The New York Times.
- Kiernan, Paul; Sugden, Joanna (October 8, 2018). "Two Top U.S. Economists Win Nobel for Work on Growth and Climate: Research of William D. Nordhaus and Paul M. Romer has had immense impact on global policy making, the Academy says". The Wall Street Journal.
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