Tjalling C. Koopmans’ speech at the Nobel Banquet, December 10, 1975

Your Majesties, Your Royal Highnesses, Ladies and Gentlemen,

Also on behalf of my colleague and co-recipient of the 1975 award for economics, I wish to thank the Royal Academy of Sciences, the Nobel Foundation, and all our other institutional and personal hosts for the splendid hospitality and friendship extended to us.

Catapulted into my present brief role, and now speaking just for myself, I want to use the few minutes allotted to me to address particularly the group of world leaders in the natural sciences here assembled – my new colleagues, I can hardly believe it!

A few days ago I glanced at an advance description of the memorable activities of this afternoon. Between the list of names for the sciences and that for economics, the typist’s finger had slipped, and an extra blank line had appeared. This mechanical accident struck me as symbolic of the distant-cousin relations between the natural sciences and economics. A certain reserve, a certain bewilderment, a lack of knowledge of each other’s ideas are, I think, a world-wide phenomenon, regardless of social system or degree of development.

However, more and more problems are now crowding in on the international scientific community which require joint efforts from the various disciplines, natural and social. I shall briefly describe just one example, but a big one.

To supply the world with needed energy over the next thirty years, we shall have to dig deeply into reserves of fossil fuels, especially coal; to buy time for the development of more lasting solutions to shift to as time goes on. The principal releases from a global point of view are probably carbon dioxide, particulates, and heat. By itself alone, CO₂ would increase the mean global temperature. Particulates alone have been said to have a temperature-decreasing effect. It is my understanding that the net joint effects of the three releases is not yet well known. However, the distribution over time of the effects is different in that heat release is immediate, and particulates filter down from the atmosphere very much faster than the excess CO₂ is absorbed into the ocean. I merely note that we have a causal loop here that begins with economic variables (combustion of fossil fuels), proceeds to climatic variables (mean temperatures and precipitation in various areas and seasons), and from there to agronomic variables (length of the growing season and crop yields in various areas) which in turn affect the economy via the food supply. Study of the entire feedback loop will require the coordinated efforts of economists, climatologists, agronomists.

One tentative exploration of the first link in this chain has been made but not yet published by my Yale colleague, William Nordhaus. Ignoring particulates and heat generation, he has focused on how the most economic mix of techniques for energy production (and especially electric power generation) varies with environmental standards for CO₂. More precisely, he has estimated how energy production and consumption depend on an arbitrary upper bound or standard for the annual average concentration of CO₂ in the atmosphere. The lower the bound – that is, the stricter the standard – the higher the cost per unit of energy because the collection of techniques needs to be shifted to higher cost techniques. The higher unit cost will also reduce the demand for energy products, and so reduce the total benefits. The study is an open invitation to climatologists and agronomists to trace the probable effects of the CO₂ standard on climate variables and hence on polar icecaps, on ocean levels and on agricultural yields – thus enabling economists to seek a balance between energy production, food production, and anticipated other global effects and interregional inequities to be compensated for.