Special Feature: Nobel Prize in Economics
Dale Mortensen Wins Nobel Prize
Professor, two others, win 2010 prize in economics for "analysis of markets with search frictions"October 11, 2010 | by Pat Vaughan Tremmel
EVANSTON, Ill. --- Dale T. Mortensen, the Ida C. Cook Professor of Economics at Northwestern University's Judd A. and Marjorie Weinberg College of Arts and Sciences, won the 2010 Nobel Prize in Economics.
He won the prize with Peter Diamond, Massachusetts Institute of Technology, and Christopher Pissarides, London School of Economics and Political Science in the United Kingdom.
The three economists will share a total prize of $1.5 million.
The prize recognized “their analysis of markets with search frictions,” the Royal Swedish Academy of Sciences said. The three developed a framework that seeks to explain why there are so many people unemployed at the same time as there are a large number of job openings. Their model helps explain the ways in which unemployment, job vacancies and wages are affected by regulation and economic policy and can also be applied to other areas, including the housing market.
"This is a great honor for Professor Mortensen and for Northwestern and a recognition of the important research that is being done at the University. On behalf of the entire Northwestern community, I extend my congratulations to Professor Mortensen," said Northwestern University President Morton Schapiro.
Mortensen found out about the prize today in Denmark during lunch with a colleague just prior to a seminar where a visitor from the U.S. talked about data related to data Mortensen has been studying in Denmark. He was caught off guard when he got the call, indicating that even though he knows people who decide the prizes, he hadn’t heard a word.
He jokingly gave the simplest explanation of his complicated research when questioned during a conference call with the media today from Aarhus University in Denmark. “It takes time for workers to find jobs and for employers to find workers," he said.
The Nobel Prize is given for work done over a very long time, stressed Mortensen, who has been at Northwestern since 1965. Colleagues often tease him about his long tenure at Northwestern in relation to his work about matching employers and employees. “My entire career has been at Northwestern, and one of the things I study is why people move. They say I study it to see what other people do.”
Mortensen pioneered the theory of job search and search unemployment and extended it to study labor turnover, research and development, personal relationships and labor reallocation. His insight, that friction is equivalent to the random arrival of trading partners, has become the leading technique for analysis of labor markets and the effects of labor market policy. The development of equilibrium dynamic models designed to account for wage dispersion, the time series behavior of job and worker flows, and the role of reallocation in the determination of aggregate growth and productivity are the principal topics of his current research. His publications include more than 50 scientific articles. His book, “Wage Dispersion: Why Are Similar Workers Paid Differently?” was published by MIT Press in 2003.
Mortensen is the second current or former faculty member of Northwestern to recently receive a Nobel Prize in Economics. Roger B. Myerson, who received a Nobel in economics in 2007 while a professor at the University of Chicago, was a member of the faculty in the Kellogg School of Management from 1976 to 2001. It was during that time that much of his Nobel-winning research was conducted.
One of Mortensen's co-winners, Peter Diamond, was the winner of the first Edwin Plein Nemmers Prize in Economics, which is awarded every other year by Northwestern University to a leading figure in economics. Diamond received the Nemmers Prize in 1994. Diamond is the fourth recipient of the Nemmers Prize to subsequently be awarded the Nobel Prize in Economics.
The Nobel Prize in Economics was established by Sweden's Riksbank in 1968 to mark the central bank's 300th anniversary. The prize is awarded annually for "work of outstanding importance" in the field of economic science, and the winners are selected by the Royal Swedish Academy of Sciences.
Other comments about Professor Dale Mortensen:
"All of us at Northwestern University are thrilled that Professor Dale Mortensen, a member of our faculty in the Department of Economics since 1965, has received this year's Nobel Prize," said Northwestern University Provost Daniel Linzer. "Dale's many contributions in his scholarship are matched by his long record of excellence in teaching and service at Northwestern. We extend our congratulations to Dale, and to his colleagues and students."
"As an economist, I've always felt that Dale was the most intuitive and smartest guy in the department," said Joel Mokyr, Robert Strotz Professor of Arts and Sciences at Northwestern. "He is a wonderful colleague and a great human being, and his work has been absolutely pathbreaking. He explains a great deal about why at any given point in time there are a lot of people who are not working, and he gives a very rich and extremely useful theory of unemployment that’s very different from our normal ideas of unemployment."
"Dale has certainly made fundamental contributions to help us understand how markets move toward equilibrium, especially in labor markets," said Ronald Brauetigam, Harvey Kapnick Professor of Economics and associate provost for undergraduate education at Northwestern. "The basic problem is often described as the search process or the process of matching, primarily between employers and employees. What Dale did with his research, starting four decades ago, was to help us understand how this very complicated matching process works. At the microeconomic level, we understand a lot better how matches actually take place at the level of the individual worker and the individual firm. And at the macro level, his work has helped us understand how matching affects the aggregate level of employment in the economy. So these are very important contributions."
“Dale Mortensen’s work puts flesh on the bones of the theory of markets," said Robert Coen, professor emeritus of economics at Northwestern. “The textbook description of a market is a place where buyers and sellers come together to exchange goods and services. In practice, buyers and sellers don’t just come together; they have to find one another in what may be a lengthy and complicated search, with each side having to decide at each point whether to stop searching and make a trade, continue searching or drop out of the market. By advancing models of how markets actually work, he lays the groundwork for systematic assessments of the impacts of economic policies on market performance, for example, on how unemployment benefits or employment subsidies affect unemployment and the allocation of labor. The significance and inspiring quality of Dale’s work is evident in the extraordinary number of graduate students he has mentored at Northwestern and elsewhere and the number of research collaborators he has found worldwide."