Posted on 10/11/2010 9:58:02 AM PDT by Willie Green
WASHINGTON (MarketWatch) — Three economists — including one rejected by the Senate as too inexperienced to work at the Federal Reserve — have won the Nobel prize in economics for their work in explaining why markets sometimes don’t work so well.
Specifically, Peter Diamond of MIT, Dale Mortensen of Northwestern University and Christopher Pissarides of the London School of Economics were honored for their insights into unemployment. It’s certainly a timely topic. Read MarketWatch’s related article on the 2010 prize.
The problem with unemployment is that, theoretically, it shouldn’t exist. Efficient market theory says unemployed workers should always be able to find a job if they just lower their standards enough, just as all employers should be able to find workers if they just lower theirs.
By this theory, all unemployment is voluntary.
Diamond, Mortensen and Pissarides reject that theory, arguing that it’s costly to find just the right job — that is, one that matches your skills and abilities and pays you what you are worth. From the employer’s point of view, it’s just as costly: All the applicants look pretty much the same at first; it’s not easy to tell beforehand if they can do the job, or whether you can find someone who’ll do the job for less. Searching, in sum, is costly.
The upshot of this research is that this searching — they called it “friction” — can make markets inefficient. Taking the first job offered, or hiring the first applicant would mean the economy wouldn’t work as well as it could. We’d get Ph.D.’s driving cabs, and high-school dropouts running nuclear plants.
(Excerpt) Read more at marketwatch.com ...
I think it’s caused by more sellers than buyers. Can I have my prize now?
Sooooooooooooo, how do artificially high minimum wages factor in to this?
And how does paying people to NOT work factor in?
And let us not forget punishing employers by forcing them to pay arbitrarily high compliance costs per employee.
Transfer payments factor into their Nobel winning argument? Would I rather have $300 a week for not working or $400 a week for working? Depends on my living situation and morals, doesn’t it?
Nobel Laureate economists consider those people to be working - I believe the technical term they use is 'working the system'.
I’m told (but haven’t verified) that here in California you now need a $75 license to work in fast food.
Paul Krugman ‘won’ a Nobel for economics. ‘Nuff said.
Especially when:
1. The Sellers have no marketable job skills.(belonging to a Union like the SEIU makes you OBAMA's Friend but not unnecessarily a potential worker a business will hire)
2. The Sellers have an unrealistic assessment of their own worth.(why should I pay an illiterate American Worker when I can pay less for a semi literate person living overseas).
An invisible hand or an iron fist.
Life can never be perfect. A life completely micromanaged by bureaucrats is the least perfect of all.
How about a Nobel-prize winning study on why Government intervention fails?
The Nobel lost most of it’s relevance when it awarded Gore, and it lost what little it had left with Obozo’s award.
The Nobel Prize committee slapping Republicans again I'm sure.
You have two choices, WG: free men voluntarily allocating their resources or governments seizing the resources of free men and allocating them instead.
"The earth is given as a common stock for man to labor and live on. If for the encouragement of industry we allow it to be appropriated, we must take care that other employment be provided to those excluded from the appropriation. If we do not, the fundamental right to labor the earth returns to the unemployed... It is not too soon to provide by every possible means that as few as possible shall be without a little portion of land. The small landholders are the most precious part of a state."
~ Thomas Jefferson
“To take from one because it is thought that his own industry and that of his father’s has acquired too much, in order to spare to others, who, or whose fathers have not exercised equal industry and skill, is to violate arbitrarily the first principle of association—’the guarantee to every one of a free exercise of his industry and the fruits acquired by it.’” —Thomas Jefferson
Luckily, this is a republic and not a democracy, hence there is no need to descend into Brandeis’ class warfare ideology.
By this theory, all unemployment is voluntary.
Diamond, Mortensen and Pissarides reject that theory, arguing that it’s costly to find just the right job — that is, one that matches your skills and abilities and pays you what you are worth. From the employer’s point of view, it’s just as costly: All the applicants look pretty much the same at first; it’s not easy to tell beforehand if they can do the job, or whether you can find someone who’ll do the job for less. Searching, in sum, is costly.
Thomas Sowell was writing (Knowledge and Decisions) about the cost of knowledge back in 1980.
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