Nobel Memorial Prize Winners: Mortensen, Diamond, and Pissarides

The 2010 winners of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (often incorrectly called the Nobel Prize for Economics) are Peter Diamond, Dale Mortensen, and Christopher Pissarides.  They did work on search models, labor markets, and unemployment.  In particular, their work helps explain why even when there are more job openings than workers, there may still be measurable unemployment called frictional unemployment.  For a good summary of their work and insights, see the New York Times (free registration may be required) at The Work Behind the Nobel Prize By EDWARD L. GLAESER.

So what do these folks suggest for today’s economy where we have very high unemployment that has not come down at all since it went up over 18 months ago?  Let’s go to the New York Times in a different article (emphasis is mine):

The work is especially relevant today, as policy makers try to understand and combat the causes of stubbornly high unemployment in countries like the United States.

In a phone interview, Professor Diamond, 70, said that one of the implications of his work was that more fiscal and monetary stimulus was probably necessary to speed up job growth.

“The slower it happens, the more workers lose their skills and stop searching, and so the process goes more poorly after that,” Professor Diamond said.

President Obama nominated Professor Diamond in April for a Fed board position, where he would serve under his former student, Ben S. Bernanke, the Fed chairman. But in August, under an obscure procedural rule, the Senate sent Mr. Diamond’s nomination back to the White House before starting its summer recess, and a senator questioned his experience.

President Obama renominated Professor Diamond for the Fed position on Sept. 13. A hearing on his confirmation is still to come.

Note too that one of these prize winners, Peter Diamond, has been nominated to join The Federal Reserve bank board of governors.  But, Republicans in the Senate, led by Senator Shelby of Alabama, have stopped the nomination claiming that Peter Diamond is “unqualified”.  Res ipsa loquitur