WSJ: Trio Shares Nobel Economics Prize

By Charles Duxbury
Wall Street Journal
October 11, 2010
http://bit.ly/bHTseT



STOCKHOLM—American Peter Diamond and Dale Mortensen and British-Cypriot Christopher Pissarides won the 2010 Nobel Prize in Economics on Monday “for their analysis of markets with search frictions,” the Royal Swedish Academy of Sciences said.

The framework seeks to explain, for example, why there are so many people unemployed at the same time as there are a large number of job openings.The three laureates have developed a theoretical framework to examine how buyers and sellers look for each other in a marketplace and how the time and resources needed for this search can create friction resulting in some buyers or sellers failing to achieve their goals.
The Nobel Prize in Economics was established by Sweden’s Riksbank in 1968 to mark the central bank’s 300th anniversary. The prize is awarded annually for “work of outstanding importance” in the field of economic science and the winners are selected by the Royal Swedish Academy of Sciences.The laureates’ models help to explain the ways in which unemployment, job vacancies, and wages are affected by regulation and economic policy and can also be applied to other areas including the housing market.Mr. Diamond, of the Massachusetts Institute of Technology, analyzed the foundations of such “search markets” while Mr. Mortensen, of Northwestern University, and Mr. Pissarides of the London School of Economics and Political Science in the U.K., applied the framework to the labor market.

Previous winners of the prize include Paul Krugman in 2008 and Thomas Shelling in 2005.The three economists will share a total prize of 10 million Swedish kronor ($1.5 million), the same amount as for other Nobel prizes, to be paid by the Riksbank.