When Peter Diamond, PhD ‘63, learned he had won the 2010 Nobel Prize in Economic Sciences, he was in a car, riding home from Boston’s Logan airport, after a marathon trip from New Zealand via San Francisco. But Diamond did not find out directly from the Nobel Foundation; the award had just been made public, and a colleague, assuming he already knew, had called to offer congratulations. “Fortunately, I was sitting down, and I wasn’t behind the wheel,” Diamond joked in a press conference at MIT a few hours later.
Diamond, Institute Professor and professor of economics at MIT, shared the award with Dale T. Mortensen of Northwestern University and Christopher A. Pissarides of the London School of Economics and Political Science for their “analysis of markets with search frictions.” Diamond wrote several influential papers on the topic in the 1970s and 1980s. The aim of these studies was “to pay much closer attention to how the economy plays out in real time than in the simplest abstractions of how markets work,” he says. “In the labor market, it takes time for workers to find suitable jobs, it takes time for employers to find suitable workers, and that dynamic [affects] how wages are determined and how efficient the economy is.”
Diamond has also made influential contributions in the areas of public finance, taxation, Social Security, and behavioral economics. “As a professional economist, Peter has embraced the role of public citizen, conducting highly influential research over five decades on a remarkably diverse range of subjects,” President Susan Hockfield said while introducing Diamond at the press conference.
“It shows that sometimes the good guys do win,” said a beaming Robert M. Solow HM, Institute Professor emeritus, one of many MIT economists who attended the event on short notice.
The Nobel marks the second time Diamond made headlines in 2010. Last spring, he was nominated by President Barack Obama to serve on the Board of Governors of the Federal Reserve, the central bank of the United States. At press time the nomination was awaiting confirmation by the U.S. Senate.
Diamond earned his PhD from MIT under Solow (who also won the Nobel Prize, in 1987) and has taught at MIT since 1966. “The MIT economics department has just been a perfect place for me,” he says. He is the fourth person to win the Nobel while a member of the department, following Paul Samuelson (1970), Franco Modigliani (1985), and Solow. Eight other MIT alumni have also won the economics prize.