3 Share Nobel Economics Prize for Labor Analysis
The 2010 Nobel Memorial Prize in Economic Science was awarded on Monday to Peter A. Diamond, Dale T. Mortensen and Christopher A. Pissarides for their work on markets where buyers and sellers have difficulty finding each other, in particular in labor markets.
For decades, the researchers have studied what happens when a market is not made up of identical, cookie-cutter units — as is the case with the job market, where workers have different skills and weaknesses, and where all companies have different types of jobs they need to fill. In many cases, there are significant search costs to finding the ideal match between a buyer and a seller of a good, like the job to a job-seeker.
Professor Diamond, 70, an professor and a nominee to the Federal Reserve Board who was effectively blocked by the Senate earlier this year, first developed a broad theoretical framework for studying markets with search costs in 1971. Professors Mortensen, 71, of , and Pissarides, 62, of the London School of Economics, later worked with Professor Diamond to apply the theory to the labor market in particular, and how government policy could improve the matching of workers to jobs.
“The Laureates’ models help us understand the ways in which unemployment, job vacancies, and wages are affected by regulation and economic policy,” according to the citation from the prize committee.
The work is considered by many researchers to be particularly timely in today’s economic climate, in which many developed countries like the United States are facing stubbornly high unemployment rates. For example, the theory developed by the three economists has been used to try to design alternative unemployment benefit systems, and to determine how hiring and firing costs affect the unemployment rate.
In a telephone interview during the Nobel news conference in Sweden, Professor Pissarides said that he thought the work being honored had one lesson in particular for today’s policymakers: “What we should really be doing is make sure the unemployed do not stay unemployed for too long, to try to give them direct work experience,” so that they “don’t lose their attachment to the labor force.”
Theories about search in markets have also been applied to many other areas, like housing, public economics, family economics, finance and monetary economics.
While the applications of their work is broad, Professor Diamond’s practical experience was called into question earlier this year when he was nominated for a Fed governor position.
In August, Senator , Republican of Alabama, asserted that Professor Diamond did not have enough experience for the position, saying, “I do not believe that the current environment of uncertainty would benefit from policy decisions made by board members who are learning on the job.”
had nominated Professor Diamond in April for a position on the , under the economist’s former student and now chairman . But in August, under an obscure procedural rule, the Senate sent Mr. Diamond’s nomination back to the White House before starting its summer recess.
President Obama Professor Diamond for the open Fed position on Sept. 13.
Two other officials — and — who were nominated for the Fed in April along with Mr. Diamond were confirmed in late September.
The Nobel in economic science is awarded by the Royal Swedish Academy of Sciences, and is not one of the original prizes created by Alfred Nobel. Rather, it is formally known as the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel. In addition to a medal and a diploma, the laureates receive 10 million Swedish kronor, or about $1.5 million.
Last year, the prize was awarded to social scientists, Elinor Ostrom at , and Oliver E. Williamson at the , for their work in describing the numerous relationships within a company or among companies and individuals that shape market behavior.