How the Nobel Prize in Economics for the American Peter Diamond
Author: Michelle Leonny
The Royal Academy of Sciences of Sweden awarded the Nobel Prize in Economics to Americans Peter Diamond, Dale T. Mortensen and Christopher Passerines Cypriot-British, three students of labor markets and phenomena such as unemployment. The three researchers were awarded the Nobel “for his analysis of markets with search frictions,” according to the decision of the Academy.
Diamond highlights its “decisive contribution” to the theory of search and matching markets, while Mortensen and Passerines developed this theory and applied mainly to labor market analysis. “Models of laureates help us understand how unemployment, vacancies and wages are affected by regulation and economic policies,” said the Academy.
Their achievements allow us to understand what factors particularly unemployment and develop, but can also be applied to issues related to the housing market, monetary theory and state economic policies, financial, regional and even family. In contrast to classical models that establish in these markets, buyers and sellers do not always contact each other instantly and the demands and objectives of each are not always satisfied, as with companies seeking employees and those seeking work.
Since the search takes time and resources, generate friction in the market, so there may be unemployed, although there are vacant jobs. That is why an unregulated market is not necessarily a unique and efficient outcome, as stated in the classical model, but there are several possible, as governments seek ways to bring the economy to the best possible outcome.
The use of mathematical models to analyze the search market dates back to the 1960′s, but it was in 1971 when he received a significant boost to a study by Diamond on price formation in markets and how the friction generated in the process cause different results. The three winners developed this theoretical construct in later years, and one of its main achievements was the model called Diamond-Mortensen-Passerines, “the tool most used to analyze unemployment, how companies recruit workers and training wages, according to the Academy.
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