A labour market economist rejected after being nominated by President Barack Obama for the US Federal Reserve Board of Governors has won his profession’s top honour.
MIT academic Peter Diamond is one of three economists who have won the 2010 Nobel Prize for Economic Sciences.
His nomination to the Fed was returned to the White House without a single vote on grounds he lacked competence. However, he has been renominated and this awaits another vote by the Senate Banking Committee before the nomination can be reconsidered by the floor of the House.
Mr Diamond, along with Dale Mortensen of Northwestern University and Christopher Pissarides, a British-Cypriot at the London School of Economics, were chosen for their "analysis of markets with search frictions.”
The winners have investigated ways in which labour market dynamics can produce different levels of unemployment, and in particular how high unemployment can persist.
They explored the gradations between "cyclical" and "structural" unemployment, and the conditions under which one or the other arises or gives way to the other.
Important to the work is the extent to which unemployment can emerge without recourse, within models, to assumptions about market imperfections.
Mr Diamond, 70, whose Wikipedia profile is here, has also written extensively on efficiency across generations and on optimal taxation, and in an applied fashion on issues related to social security programmes.
His work on labour markets includes a classic paper on the Beveridge curve, which is often cited as evidence for structural unemployment.
In his research career, Mr Mortensen, 71, has extended the insights from his work in search and matching theory of frictional unemployment to study labour turnover and reallocation, and personal relationships.
Professor Pissarides holds the Norman Sosnow Chair in Economics at the LSE and is director of the research programme on macroeconomics at the Centre for Economic Performance, He has co-authored several studies with Mr Mortensen.
Economics blogger Tyler Cowen at Marginal Revolution has summaries of their work: Diamond, Mortensen and Pissarides.
Tue, 12 Oct 2010