Congratulations to this Year's Nobel Laureates

Mon, 11 Oct 2010 14:11:59 +0000

From The New York Times this morning:

The 2010 Nobel Memorial Prize in Economic Science was awarded on Monday to Peter A. Diamond, Dale T. Mortensen and Christopher A. Pissarides for their work on markets where buyers and sellers have difficulty finding each other, in particular in labor markets.

For decades, the researchers have studied what happens when a market is not made up of identical, cookie-cutter units — as is the case with the job market, where workers have different skills and weaknesses, and where all companies have different types of jobs they need to fill. In many cases, there are significant search costs to finding the ideal match between a buyer and a seller of a good, like the job to a job-seeker.

Well deserved all around.  This is the takeaway from the article (emphasis added):

The work is considered by many researchers to be particularly timely in today’s economic climate, in which many developed countries like the United States are facing stubbornly high unemployment rates. For example, the theory developed by the three economists has been used to try to design alternative unemployment benefit systems, and to determine how hiring and firing costs affect the unemployment rate.

In a telephone interview during the Nobel news conference in Sweden, Professor Pissarides said that he thought the work being honored had one lesson in particular for today’s policymakers: “What we should really be doing is make sure the unemployed do not stay unemployed for too long, to try to give them direct work experience,” so that they “don’t lose their attachment to the labor force.”

That means spending money to put people to work.  To use the money wisely, spend it on things we know we will need in the future.