Peter Diamond, Dale Mortensen and Christopher Pissarides shared the 2010 Nobel Prize in Economic Sciences for their work on the efficiency of recruitment and wage formation as well as labor-market regulation.
The laureates “have formulated a theoretical framework for search markets,” the Royal Swedish Academy of Sciences said in a statement today. “Peter Diamond has analyzed the foundations of search markets. Dale Mortensen and Christopher Pissarides have expanded the theory and have applied it to the labor market. The laureates’ models help us understand the ways in which unemployment, job vacancies, and wages are affected by regulation and economic policy.”
Annual prizes for achievements in physics, chemistry, medicine, peace and literature were established in the will of Alfred Nobel, the Swedish inventor of dynamite who died in 1896, and the first prizes were handed out in 1901. The prize in economics was set up by Sweden’s central bank in 1968. Past winners since 1969 include Milton Friedman, Amartya Sen, James Tobin, Paul Krugman, Robert Solow and Gunnar Myrdal.
Pissarides, 62 -- an economics professor at the London School of Economics -- made his reputation through his work on job flows and unemployment. He related job creation to the number of unemployed, the number of vacancies and the intensity with which workers look for jobs and companies recruit applicants. The more eagerly job seekers look for work, the more jobs companies are likely to offer because it will be easier to fill them, according to Pissarides.
Mortensen, 71 -- a professor at Northwestern University -- pioneered the study of how workers search for jobs. He found that labor-market rigidities can cause unemployment as job-seekers look for the best work at the highest pay. The intensity of that job search determines how long workers stay unemployed and in turn can be affected by changes in the level and duration of jobless benefits.
Diamond, 70 -- an economics professor at the Massachusetts Institute of Technology -- has researched a wide range of subjects. His earliest work, published in the 1960s, focused on the long-term impact of the growing national debt on the economy.
In a paper written in 2005 with Peter Orszag, who stepped down as President Barack Obama’s budget director in July, Diamond argued that Social Security’s long-term financial health could be restored through modest cuts in benefits and tax increases.
President Barack Obama chose Diamond for a post on the Federal Reserve Board in April, subject to confirmation by the Senate. The nomination was later returned to the White House because of objections from at least one unidentified senator. Obama resubmitted Diamond’s name on Sept. 13.
The award’s official name is The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. The money, 10 million kronor ($1.5 million), a gold medal and a diploma, will be handed out to the laureate at a Stockholm ceremony on Dec.10, the anniversary of Nobel’s death.
“Why are so many people unemployed at the same time that there are a large number of job openings?” the Academy Sciences wrote in the statement today. “This year’s laureates have developed a theory which can be used to answer these questions. This theory is also applicable to markets other than the labor market.”
The 2009 economics prize was awarded to Elinor Ostrom, the first woman to win, and Oliver Williamson for research into the limits of markets and how organizations work. Krugman won the prize in 2008 “for his analysis of trade patterns and location of economic activity,” the academy said at the time.