Monday, October 11, 2010

Nobel Prize in Economics Goes to Diamond, Mortensen & Pissarides

The Nobel Committee recognized this year the very important contributions to macroeconomics of Diamond, Mortensen & Pissarides:
This year’s three Laureates have formulated a theoretical framework for search markets. 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. This may refer to benefit levels in unemployment insurance or rules in regard to hiring and firing. One conclusion is that more generous unemployment benefits give rise to higher unemployment and longer search times.
It's interesting to notice that earlier this year the US Senate controlled by the Democratic Party rejected the nomination of Diamond for the Federal Reserve Board due to the obstruction of a Republican Senator who declared that "Professor Diamond is an authority on tax policy and Social Security. It is not clear, however, that his background is ideally suited for monetary policy, especially given the current challenges facing the Fed."

I'd say revenge is a dish best served cold.

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