Nobel Prize in Economics highlights "search frictions"
What is commonly referred to as the Nobel Prize in Economic Sciences went to professors Peter Diamond at Massachusetts Institute of Technology, Dale Mortensen Northwestern University and Christopher Pissarides at the London School of Economics for their analysis of "markets with search frictions".
Search friction is when buyers and sellers have trouble hooking up. Finding each other is an inefficient process that takes time and money. Search friction impacts the labor market, when unemployed people try to find employers to hire them, and vice versa.
The Diamond-Mortensen-Pissarides model, named after this year's three economics prize winners, helps answer questions like why so much unemployment exists in spite of so many job openings.
Nevertheless, Tore Ellingson who sat on this year's economics prize committee, insists that this year's decision had nothing to do with the current economic crisis. "Absolutely not. We operate on other time-scales than current economic events." He added, "It's where the research frontier is, not where the news is."
The laureates' theories help explain the ways in which unemployment, job vacancies, and wages are affected by regulation and economic policy, according to a press release from the economics committee.
The economics prize is the only one of the six prize categories that Alfred Nobel did not establish it in his will, so it is not actually a Nobel prize, even though it is generally considered to be one. During the late 1960s, Sweden's central bank established the prize in memory of Nobel, awarded annually in Stockholm.