Stern’s Romer Is the Economist of Ideas and Now a Nobel Laureate

Not only has Paul Romer created waves in the world of Economics, but he’s also a model for the role of professor and researcher in modern society. During the recent Fireside Chat in honor of Romer’s Nobel win, Donald Marron — founder of the Marron Institute of Urban Management, which Romer now leads — put it succinctly: “He is a man of both thought and action.”

Romer recently joined the ranks of six other NYU professors in the last 20 years who have won Nobel Prizes. The award-winning research by our very own professors has focused on everything from the impact of interest rates on the economy to analyzing economic time series with time-varying volatility. Heady stuff.

The work for which Romer was awarded the prize, however, centers on pure ideas. Sounds almost too simple, doesn’t it? Indeed, there is an easy elegance to his thought.

Stanford Professor of Economics, Chad Jones, sums it up: “Here is the key insight: ideas — designs or blueprints for doing or making something — are different from nearly every other good in that they are non-rival. Standard goods in classical economics are rivalrous — as more people drive on a highway or require the skills of a particular surgeon or use water for irrigation, there’s less of those goods to go around.”

The Royal Swedish Academy of Sciences, responsible for awarding the Nobel Prize in Economics, emphasizes the impact of Romer’s work: “The theory is both conceptual and practical, as it explains how ideas are different to other goods and require specific conditions to thrive in a market. Romer’s theory has generated vast amounts of new research into the regulations and policies that encourage new ideas and long-term prosperity.”

Jones, who also works for the National Bureau of Economic Research, goes on to say that, “[Romer’s] 1990 paper is a watershed. It stands as the most important paper in the growth literature since Solow’s Nobel-recognised work.” But his work does not stop there.

Despite his recent recognition for purely academic achievements, Romer is no stranger to the real world. He’s had a meandering career — from researcher to tech entrepreneur, (when he started up and then sold the education app Aplia) to Chief Economist at the World Bank, and now back to academia. These experiences all emboldened Romer to seek even more practical applications for putting his thoughts into action.

During the Fireside Chat, Marron went on to point out that Romer, once poached from Stanford to teach here at Stern, had the distinct advantage of getting to “combine a distinguished research institution with a vibrant city.” In other words, there was no better place to test his theories than at NYU. And, it’s at the Marron Institute, as well as within the Urbanization Project at Stern, which Romer founded, that the economist currently finds his most rewarding outlet.

Within these organizations, Romer has pushed forward research and has created real impact on topics and in geographies around the world, including air quality in Mexico City, bus service in Brooklyn, and human rights in infamous high-security prisons. He has a team that regularly goes to locations like Sing Sing to collect data from inmates — not exactly an armchair brand of academia!

Romer is a strong believer that cities make us smarter, and he’s made it his mission to pursue paths for the intelligent development of modern cities. In the abstract from his own 2014 paper entitled “Urbanization as Opportunity,” he states, “Urbanization deserves urgent attention from policy makers, academics, entrepreneurs and social reformers of all stripes. Nothing else will create as many opportunities for social and economic progress.”

In the aforementioned work, he contrasts differing examples of successes like New York City and Shenzhen, the Chinese city that links Hong Kong to the country’s mainland, as proof for how powerful human intention can be. In examples like these, Romer hones in on what’s generalizable about successful cities and uses his findings to create a blueprint for urban development.

Despite Romer’s acknowledgment that the world may never again bear witness to a political environment that would allow for the type of major city re-planning Baron Haussmann undertook in the mid-1800s in Paris — which despite its small size, is a model city — he strongly believes in implementing the maximum feasible amount of city planning.

He adds that when cities experience unplanned, disorderly growth, expensive retrofits are often required. In undeveloped areas that are blighted with planning difficulties, he advocates for a “Burning Man-approach.” That is, as he put it in the Fireside Chat, “put stakes in the ground where the next round of development needs to happen — you can’t camp where there are stakes in the ground.”

Research that the Marron Institute is conducting in Colombia, where it’s drafted the “Colombia Atlas of Urban Expansion” in partnership with the country’s National Planning Department, is important in demonstrating this approach in action. As Romer insists, “talking about it in the abstract just doesn’t do it.”

During the Fireside Chat, Dean Raghu Sundaram acknowledged the importance of research like this but provoked Romer by saying, “how do we get policy makers to pay attention?”

Romer did not skip a beat. “Facts always trump theories,” he insisted. To that point, it will be of increasing importance to not only invest in research that benefits mankind, but to continuously test it out in the real world in order to obtain irrefutable results that aid policy makers in their decisions.

As a fitting call to action at the end of the Fireside Chat, another Stern Nobel Prize-winning economist, Robert Engle, pushed Romer on the topic of the importance of investing in innovation. Using a transportation analogy fit for a modern city, Romer underlined: “It is our responsibility to steer innovation rather than just step on the gas.”

 

© NYU Photo Bureau: Goldman

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