Monday, October 11, 2010
An economics Nobel for the LSE
Posted by David Smith at 04:00 PM
Category: Thoughts and responses

The three winners of the Nobel prize for economics (the Bank of Sweden prize) are Peter Diamond, Dale Mortensen and Christopher Pissarides, the latter from the London School of Economics. They have won the prize "for their analysis of markets with search frictions".

This is the LSE's description of Professor Pissarides work: Professor John Van Reenen, Director of LSE's Centre for Economic Performance, where Professor Pissarides has worked for the past two decades, comments on the award:

‘Hearty congratulations to LSE's new Nobel Laureate, Chris Pissarides. ‘Chris has been a cornerstone of life at the Centre for Economic Performance (CEP) since our foundation in 1990 and has led our successful programme on macroeconomics, particularly on unemployment.

‘I am delighted that Chris has been recognised for his outstanding work in understanding how markets really work. Rather than assuming that workers were being smoothly and instantaneously matched with jobs as in traditional models, he elegantly modelled the process by which both sides are constantly searching for opportunities to find the right match.

‘These "frictions" matter substantially for our understanding of movements between jobs and unemployment. They are not mere analytical inconveniences but fundamental to our analysis of aggregate unemployment and business cycles.

‘The problem of unemployment is the major challenge facing policy-makers today after the worst recession since the Second World War. Not only has Chris been intellectually engaged with the foundations of economics, but he has also applied these principles to understanding policy issues, especially in Europe.

‘In a series of papers, he has shown how labour market regulations, entry barriers to setting up new service firms, tax and welfare policies affect differences in employment across the world. For example, many of the policies underlying the European Lisbon Agenda to tackle job creation (such as making the labour market more flexible), were based on the right economic principles but the main barriers to implementing them was lack of political will.

‘In recent years, Chris has expanded the application of search models to many other areas, such as understanding growth, female participation in the labour market and new technology. His work on matching has been applied to many other markets where finding a good match is very important such as housing and marriage.’

This is the Nobel announcement.