Wednesday, October 13, 2010
The tip of the Diamond iceberg
I have long thought that Diamond deserved a Nobel. His work, though, is wide-ranging and is not at all confined to what he was cited for - search theory and the labor market. His 1965 paper, "National Debt in a Neo-Classical Growth Model" is a wonderful paper, absolutely canonical. He adds capital to Samuelson's Pure Consumption Loans model (the Overlapping Generations model). Even in the area of labor markets, one of his papers - sorry I don't have the cite to hand - uses search theory and the idea of what have come to be called thick-market externalities to build a macro model with multiple Pareto-ranked real equilibria- a very important paper in that branch of the "new Keynesian" literature - unfortunately the less well-known branch- that did not focus on "sticky prices" as the root of all macroeconomic evil.
in the guardian uk this nobless was described as favoring cutting unemployment benefits since they further job search innefficiences. that was not my impression of diamond, but maybe the others. interesting that in the 60's they were looking at multiple equilibria, thiught that goes back at least to r goodwin and marshall.
ReplyDeletePlease, it is not a Nobel Prize. It is the Sveriges Riksbank Prize in Economic Sciences. It is really the height of arrogance for a central bank to set up a prize in economics and then attach the name of Nobel to it.
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