Peter Diamond, a nominee for a Federal Reserve Board position, and two collaborators were awarded the Nobel Prize in economics on Monday for their work on markets where buyers and sellers have difficulty finding each other.
The work of the winners — Diamond, 70, of the Massachusetts Institute of Technology, Dale Mortensen, 71, of Northwestern University and Christopher Pissarides, 62, of the London School of Economics — is best known for its applications to the job market.
The researchers spent decades trying to understand why it takes so long for people to find jobs, even in good economic times, and why so many people can be unemployed even when many jobs are available. Traditional economics, after all, would predict that wages should simply drop, helping the labor supply meet labor demand automatically and sweeping jobless workers into whatever positions were immediately open.
These researchers' explanation addresses the complications that come from searching for jobs and job candidates: It takes time for unemployed workers to be matched with the proper opening, since people are not identical, cookie-cutter units, and neither are jobs.
In a phone interview, Diamond said one implication of his work was that more monetary stimulus was probably necessary to speed up job growth.
Obama nominated Diamond to become a member of the Federal Reserve, but the Senate did not approve his nomination before lawmakers left to campaign for midterm congressional elections.
The work honored Monday also suggests that policies intended to help workers can have unintended consequences. Unemployment benefits, for example, can prolong joblessness by making it less costly to be without work.
The models help explain why European labor markets tend to be much more rigid than U.S. ones, where people can move from job to job relatively easily, at least in good times.
The Nobel laureates' line of research is active today. "Search theory" has been applied to other areas, such as money systems and venture capital markets.
In addition to a medal and a diploma, the laureates collectively will receive about $1.5 million.