The Nobel prize in economics went to two Americans and a British-Cypriot this year "for their analysis of markets with search frictions." Peter A. Diamond of the Massachusetts Institute of Technology, Dale T. Mortensen of Northwestern University and Christopher A. Pissarides of the London School of Economics and Political Science together won the 10 million Swedish kronor prize ($1.5 million).
President Barack Obama has nominated Diamond to serve on the Federal Reserve board. However, his nomination hasn't yet been approved because of Republican objections.
This year's three Laureates have formulated a theoretical framework for search markets. Diamond has analyzed the foundations of search markets. Mortensen and Pissarides have expanded the theory and applied it to the labor market. Their work can be used to answer such questions as: Why do so many people remain unemployed when there are a large number of job openings? And how can economic policy affect unemployment?
"The Laureates' models help us understand the ways in which unemployment, job vacancies, and wages are affected by regulation and economic policy," the Royal Swedish Academy of Sciences explains in a press release. "One conclusion is that more generous unemployment benefits give rise to higher unemployment and longer search times."
Search theory has been applied to other markets, particularly the housing market, but has also been used to study questions related to monetary theory, public economics, regional economics and family economics.