A British-Cypriot and two Americans, including one nominated by President Barack Obama to the Federal Reserve Board, won the 2010 Nobel Prize in Economics yesterday for work helping to explain unemployment and job markets.
The work honored is highly topical, since many countries with developed economies, including the United States, are worried about future job growth after the worst global crisis since the Depression.
The Royal Swedish Academy of Sciences awarded the $1.5-million prize to U.S. professors Dale Mortensen and Peter Diamond, the 70-year-old nominee to the Fed, as well as British-Cypriot Christopher Pissarides, 62.
The work on search markets helped explain how it was possible so many people could be unemployed at a time when a large number of jobs were on offer.
“Search theory has emerged as the predominant model for considering the effects of economic-policy measures on the labor market,” the committee said. These measures include the size of unemployment benefits and rules on hiring and firing.
“Clearly the theory does not offer very simple prescriptions for how to return to full employment,” prize committee member Tore Ellingsen said.
Return to normalcy
Diamond said he thinks stubborn unemployment will decline slowly: “With suitable macroeconomic policies, there’s no reason to think that once we get through this, we won’t get back to normal unemployment,” he said at MIT.