Peter Diamond, Dale Mortensen, and Christopher Pissarides won the "Nobel" prize in economics this year. I do not have Bill Mitchell’s expertise on search theory and labor economics. Nevertheless, I thought I’d record my reactions.
As I understand it, Diamond, Mortensen, and Pissarides think labor would be described by by the interactions of well-behaved supply and demand functions for labor if it were not for the heterogeneity of workers and jobs and the time to form matches between them. The orthodox theory would be wrong even if workers and jobs were homogeneous. So I find puzzling why I should approve of this year’s award. I think my opinion is consistent with some of Alessandro Roncaglia’s observations of trends in mainstream economics.
David Ruccio and Richard McIntyre & Michael Hillard (Hat tip to Nick Kraft) have been critical of this year’s award. Paul Krugman has praised it. Doubtless, one could find more praise in the blogosphere.
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