At its heart, economics deals with the management of scarce resources. Nature dictates the main constraints on economic growth and our knowledge determines how well we deal with these constraints. This year’s Laureates William Nordhaus and Paul Romer have significantly broadened the scope of economic analysis by constructing models that explain how the market economy interacts with nature and knowledge.

Technological change – Romer demonstrates how know- ledge can function as a driver of long-term economic growth. When annual economic growth of a few per cent accumulates over decades, it transforms people’s lives. Previous macroeconomic research had emphasised technological innovation as the primary driver of economic growth, but 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.

Romer’s solution, which was published in 1990, laid the foundation of what is now called endogenous growth theory. 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.

Climate change – Nordhaus’ findings deal with interactions between society and nature. Nordhaus decided to work on this topic in the 1970s, as scientists had become increasingly worried about the combustion of fossil fuel resulting in a warmer climate. In the mid-1990s, he became the first person to create an integrated assessment model, i.e. a quantitative model that describes the global interplay between the economy and the climate. His model integrates theories and empirical results from physics, chemistry and economics. Nordhaus’ model is now widely spread and is used to simulate how the eco- nomy and the climate co-evolve. It is used to examine the consequences of climate policy interventions, for example carbon taxes.

The contributions of Paul Romer and William Nordhaus are methodological, providing us with fundamental insights into the causes and consequences of technological innovation and climate change. This year’s Laureates do not deliver conclusive answers, but their findings have brought us considerably closer to answering the question of how we can achieve sustained and sustainable global economic growth.

Source: www.nobelprize.org

Since the first seeds of life arose around 3.7 billion years ago, almost every crevice on Earth has filled with different organisms. Life has spread to hot springs, deep oceans and dry deserts, all because evolution has solved a number of chemical problems. Life’s chemical tools – proteins – have been optimised, changed and renewed, creating incredible diversity.

This year’s Nobel Laureates in Chemistry have been inspired by the power of evolution and used the same principles – genetic change and selection – to develop proteins that solve mankind’s chemical problems.

One half of this year’s Nobel Prize in Chemistry is awarded to Frances H. Arnold. In 1993, she conducted the first directed evolution of enzymes, which are proteins that catalyse chemical reactions. Since then, she has refined the methods that are now routinely used to develop new catalysts. The uses of Frances Arnold’s enzymes include more environmentally friendly manufacturing of chemical substances, such as pharmaceuticals, and the production of renewable fuels for a greener transport sector.

The other half of this year’s Nobel Prize in Chemistry is shared by George P. Smith and Sir Gregory P. Winter. In 1985, George Smith developed an elegant method known as phage display, where a bacteriophage – a virus that infects bacteria – can be used to evolve new proteins. Gregory Winter used phage display for the directed evolution of antibodies, with the aim of producing new pharmaceuticals. The first one based on this method, adalimumab, was approved in 2002 and is used for rheumatoid arthritis, psoriasis and inflammatory bowel diseases. Since then, phage display has produced anti-bodies that can neutralise toxins, counteract autoimmune diseases and cure metastatic cancer.

We are in the early days of directed evolution’s revolution which, in many different ways, is bringing and will bring the greatest benefit to humankind.

Source: www.nobelprize.org