A Nobel for Studies About Market Imperfections

Among the three winners of the 2010 Nobel Prize in Economics announced on Monday, Peter Diamond, 70 — a star at MIT, where he retired just a few months ago — is by far the most renowned. According to many people, he has long been in line for the award.

It is still a good time for awards. Diamond and his colleagues Dale Mortensen, 71, from Northwestern University, and British-Cypriot Christopher Pissarides, 62, from the London School of Economics, won for developing research and theory about imperfections in some markets, notably the labor market.

After September 2008, when the certainties about the efficient operation of markets were hit by an unprecedented crisis — the largest in more than six decades — it makes sense to put the spotlight on studies that attempt to establish the costs and difficulties in its operation, even though these studies follow the logic of efficient markets and conclude, with no surprise, with the relative merits of deregulation and do not form a consensus in the academic community.

Adept in “behavioral economics” — an approach of economics with psychology, which earned a Nobel Prize for Daniel Kahneman and Vernon Smith in 2002 — and an expert in welfare policies, Diamond was part of the group of economists who advised the Chinese government in reforming its social security system in 2004. Afterward, he devoted himself to issues in the area of tax policy. Recently, he became interested in monetary policy.

This recent interest wasn’t enough for his nomination to a position at the Federal Reserve Board to be approved by the Senate. The nomination, made by President Barack Obama at the beginning of the year, was returned to the White House and resubmitted by Obama in September. It should be reviewed when the congressmen come back from the recess for the legislative elections this year.