Monday, October 11, 2010

Nobel Prize in Economics 2010

2010 did not look very promising for US citizens as far as the 2010 Nobel prizes go. At times most of the Nobel laureates turn out to be US citizens but none of the awards this year was given to an American until today. The last prize is the one given in Economics and two of the recepients are American while the third is a British Cypriot.

The Economics award went this year to Peter Diamond, Dale Mortensen and Christopher Pissarides for their work on unemployment. The three professors will share the $1.5 million prize that was established in 1968 by the Royal Sweedish Academy of Sciences.

The Academy praised in its statement the work that the three award recepients had done in explaining how job vacancies and wages react to economic policy and government regulation.

"According to a classical view of the market, buyers and sellers find one another immediately, without cost, and have perfect information about the prices of all goods and services... But this is not what happens in the real world," the prize committee said in a statement.

It said the trio's work enhanced understanding of "search markets" where frictions exist as demands of some buyers are not met and some sellers cannot sell as much as they want.

This could involve simple cases of a buyer and a seller of a product as well as more complex relations between employers and job seekers, or between firms and suppliers.

On the labor market, the laureates' models help understand how unemployment, job vacancies and wages are affected by regulation and economic policy, including the size of jobless benefits, the committee said.

Their theories can also be applied to housing markets, as both vacancies and the time to sell a home vary over time.


Abeer Ghani said...

Diamond, Mortensen, and Pissarides groundbreaking work in unemployment can be reflected by the manner in which they approached the problem. They did not see if from a linear persepctive, on the contrary they asked questions as to if today's unemployment in society is due to the recession or a structural mismatch between workers' skills and employer's needs. These three nobel winners come from some of the most well renowned universities in the world and bring with them concepts and conclusions which in effect shape the idea of unemployment as a whole.

Nick Terp said...

While i agree that these men have made some ground breaking research more than just recognizing their achievement needs to be done. Their theories need to be heeded by the government and used to try and influence the economy. When you understand something you can then move to fix it. Now that we understand we need to do something. These men have made a great contribution to society but now it is up to us to do something with their theories.