STOCKHOLM, Sweden, Oct. 11 (UPI) -- Three economists from the United States and Britain won the 2010 Nobel Prize for Economics, the Royal Swedish Academy of Sciences said Monday.
Peter Diamond of the Massachusetts Institute of Technology, Dale Mortensen of Northwestern University in Evanston, Ill., and Christopher Pissarides of the London School of Economics and Political Science won the prize for "their analysis of markets with search frictions," the Royal Swedish Academy of Sciences said in a release announcing its decision on awarding the 2010 Sveriges Riksbank Prize in Economic Sciences offered in memory of Alfred Nobel.
This year's winners examined why so many people are unemployed when there are a large number of job openings at the same time, and examined how economic policy affects unemployment, the committee said. The laureates developed a theory that answers the two questions and can be applied to markets other than the labor market.
The three winners formulated a theoretical framework for search markets, the release said. Diamond analyzed the foundations of search markets, and Mortensen and Pissarides expanded the theory and applied it to the labor market.
Their models "help us understand the ways in which unemployment, job vacancies and wages are affected by regulation and economic policy," the release said. One conclusion noted that higher unemployment benefits give rise to higher unemployment and longer search times.
Search theory has been applied to many areas in addition to the labor market, notably the housing market, the release said. It also has been used to study questions related to monetary theory, public economics, financial economics, regional economics and family economics.
U.S. President Obama praised Diamond and Mortensen "for their groundbreaking economic research that has applications in a wide range of areas, like unemployment and housing, where we need our best and brightest minds."
Obama said he hoped the Senate would quickly confirm Diamond's nomination to the Federal Reserve's board of governors.