Two Americans and a British-Cypriot economist won the 2010 Nobel economics prize yesterday for developing a theory that helps explain why many people can remain unemployed despite a large number of job vacancies.
Peter Diamond, Dale Mortensen and Christopher Pissarides were honored with the 10 million Swedish kronor (US$1.5 million) prize for their analysis of the obstacles that prevent buyers and sellers from efficiently pairing up in markets.
Diamond analyzed the foundations of so-called search markets, while Mortensen and Pissarides expanded the theory and applied it to the labor market.
Since searching for jobs takes time and resources, it creates frictions in the job market, helping explain why there are both job vacancies and unemployment simultaneously, the academy said.
“The laureates’ models help us understand the ways in which unemployment, job vacancies and wages are affected by regulation and economic policy,” it said.
The DMP model named after the trio shows that owing to small glitches, buyers may find it difficult to find sellers and job seekers may not find employers looking to fill a position.
Diamond, 70, is an economist at the Massachusetts Institute of Technology, and an authority on Social Security, pensions and taxation.
US President Barack Obama has nominated him to become a member of the Federal Reserve. However, Republican, Senator Richard Shelby blocked approval of his nomination before lawmakers left to campaign for the midterm congressional elections.
Diamond told a Senate committee during his nomination hearing in July that a central theme of his research has been how the economy deals with risks that affect both individuals, and the entire economy.
Mortensen, 71, is an economics professor at Northwestern University, but is currently a visiting professor at the University of Aarhus in Denmark.
Mortensen was informed that he had won the prize before a lecture, university spokesman Anders Correll said, adding: “He was very very happy but composed at the same time.”
Pissarides, a 62-year-old professor at the London School of Economics, said he received the news with “a mixture of surprise and happiness, general satisfaction.”
“This is a prize is so great you don’t believe that you will get it even after you’ve got it,” he said in a telephone conference with the academy in Stockholm.
The economics prize is not among the original awards established by Swedish industrialist Alfred Nobel in his 1895 will, but was created in 1968 by the Swedish central bank in his memory.
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