Economics Nobel: 2 Americans, 1 British-Cypriot Win
STEVE INSKEEP, host:
Let's follow up, now, on the winners of the 2010 last Nobel Prize for Economics. It goes to three different men: two Americans and one, a native of Cypress, now living in Great Britain. The Americans are Peter Diamond of MIT and Dale Mortensen of Northwestern, and the committee also gave the award to Christopher Pissarides of the London School of Economics. We're going to talk about what these three men did with NPR's Jim Zarroli.
Jim, good morning.
JIM ZARROLI: Good morning, Steve.
INSKEEP: And sometimes these Nobel prizewinners in economics are involved with very abstract economic theory, but this time they're looking into something that's extremely relevant to many, many people's lives right now.
ZARROLI: Yes, there it has to do with unemployment, job vacancies. The committee said the three men had developed models that help us understand the ways that unemployment, wages, and job vacancies are affected by regulation and economic policy. More specifically, they won for their analysis of markets with search frictions, to put it in somewhat more esoteric terms. And by search frictions, that means, you know, any factors that keep the markets from operating efficiently.
INSKEEP: Okay, what's an example of that? When you talk about you were talking about the labor market here. So, I'm looking for a job, I'm putting out my resume, what's a search friction there?
ZARROLI: Well, for instance, even in times of really high unemployment, like now, we have jobs that go unfilled. That is even true today when we have a 9.6 percent unemployment rate in the United States. So the question is, what gets in the way of someone filling that job? And it could be a number of things. It may have to do with something as simple as the way the job is advertised. Or, you know, probably more likely the kind of skills that are needed. Or, you know, maybe job hunters don't really understand that they have the skills that's needed for jobs so they don't apply. At any rate, it takes time and resources to look for work, so there can be temporary mismatch between job openings and finding the right candidate. That's what's meant by search friction and it's the thing that the winners were cited for.
INSKEEP: I'm thinking of the phrase, skill mismatch, which is this idea that sometimes, in a particular city or state, you don't have the same work skills in the work force that you actually need for the jobs that are open at the moment. That's the kind of thing we're talking about here, right.
ZARROLI: Exactly. And that's something that exists at all times, really, but in times like this when there are so many people out of work, it's especially relevant because, you know, you think there are people out there that really need jobs and there are jobs that they might be suitable for, if they just knew about them and knew how to get them.
INSKEEP: Now Jim, you were with us earlier this morning and told us a few of the people who were on the short list the public short list for this award, and you also told us the winners usually aren't on the short list and aren't part of the speculation. Were these three guys part of the speculation?
ZARROLI: No, they're not. In fact, they're not especially well known to the public at all with one exception, and that is Peter Diamond. He's actually been in the news this year. Diamond is an expert on Social Security and pensions. He was nominated by President Obama to fill one of the vacancies on the Federal Reserve Board, but his nomination was held up by the Senate. They basically went home without acting on his nomination. The ranking member on the Senate Banking Committee, Richard Shelby of Alabama, said he wasn't sure that Diamond had the kind of broad macroeconomics experience that you need to serve on the Fed. Obviously, the president says he's going to resubmit the nomination and this you might say this probably changes the dynamics, a bit, of Diamond's appointment.
INSKEEP: Nobel Prize can do that. Jim, thanks very much.
ZARROLI: You're welcome.
INSKEEP: That's NPR's Jim Zarroli. And again, the winners of the Nobel Prize for Economics: Peter Diamond, Dale Mortensen, Christopher Pissarides.
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