by Amar Yumnam
The recent and still prevalent global financial meltdown has definitely drawn the attention of both the economists and the policymakers to macroeconomic issues. In Macroeconomics, we study the issues and problems concerning the economy as a whole instead of the behaviour of single individuals and firms; the latter is the issue for Microeconomics. In the global concern with the financial meltdown, attention has been focussed on contributions of economists working in macroeconomic areas. One perennial issue of this branch is the issue of unemployment. The biggest issue of the current global economic slowdown is the widespread unemployment, particularly in the developed countries of the west.
It must be this concern with the massive unemployment in the western countries which has weighed in the mind of the Nobel Committee to award this yearâ€™s prize to three economists working on labour theory, a core sub-branch of Macroeconomics. Peter Arthur Diamond of the Massachusetts Institute of Technology, Dale Thomas Mortensen of the Northwestern University at Illinois and Christopher Antoniou Pissarides of the London School of Economics have been jointly awarded this yearâ€™s prize. Diamond has had professional association with two front-ranking institutes for research in Economics, the Massachusetts Institute of Technology itself and the University of California at Berkeley. Though Chicago University beats others in numbers, winning Nobel Prize in Economics is not a new thing for the Massachusetts Institute of Technology of which Paul Samuelson is one of the first winners of the prize. The instituteâ€™s current faculty has some young scholars who would be claimants to the prize in the years to come; look out for Ester Duflo in this connection. Dale Thomas Mortensen of the Northwestern University is a doctoral product of Carnegie Mellon University. Unlike Diamond he does not have career association with the big names of departments for study of Economics. In fact, of the three winners, he is the least widely known. Christopher Antoniou Pissarides of the London School of Economics is a Cyprus born. He has his academic association with the University of Essex and the London School of Economics itself. He is a student of another famous macroeconomist Michio Morishima under whom he worked for the doctoral degree at the London School of Economics. The London School of Economics, LSE as it is generally known, must be elated now for, despite the size of the department and the prestige associated with the name, its share in the list of Nobel Prize winners is very poor indeed.
The three economists are among the pioneers who evolved an approach to merge the two branches of economics, Microeconomics and Macroeconomics, in what is known in the literature as the study of microfoundations of macroeconomics. In this the contributions of other Nobel economists, like Kenneth Arrow and Joseph Stiglitz, on information theory and search costs have definitely been foundations for their contributions. In fact, this is the most common thread binding the three winners of this year. Diamond has worked extensively, particularly in recent years, on social security and pension issues. Of the three, Mortensen and Pissarides are genres of the very contemporary approach in macroeconomics where the long run issues are not characteristically different from the short run ones, an approach where the traditional distinction between business cycles (short run phenomenon) and growth (long run phenomenon) disappears.
For everything there is a cost; â€œ
by Amar Yumnam