Northwestern prof shares Nobel in economics

(AP) — A Northwestern University professor was named a co-winner of the 2010 Nobel economics prize Monday.

NU economics professor Dale Mortensen, along with Peter Diamond and Christopher Pissarides, won the prize for developing a theory that helps explain why many people can remain unemployed despite a large number of job vacancies.

The three were honored with the 10-million Swedish kronor ($1.5-million) prize for their analysis of the obstacles that prevent buyers and sellers from efficiently pairing up in markets.

Mortensen, 71, is currently a visiting professor at the University of Aarhus in Denmark. He was informed before a lecture that he had won the prize, university spokesman Anders Correll said. "He was very very happy but composed at the same time," Correll said.

Mortensen has been on NU's faculty since 1965 but has held a host of visiting appointments at other schools in the U.S. and abroad, according to a biography on a university Web site.

Diamond analyzed the foundations of so-called search markets, while Mortensen and Pissarides expanded the theory and applied it to the labor market.

Because searching for jobs takes time and resources, it creates frictions in the job market, helping explain why there are both job vacancies and unemployment simultaneously, the academy said.

"The laureates' models help us understand the ways in which unemployment, job vacancies and wages are affected by regulation and economic policy," the citation said.

Diamond, 70, is an economist at the Massachusetts Institute of Technology, and an authority on Social Security, pensions and taxation.

President Barack Obama has nominated him to become a member of the Federal Reserve. However, the Senate failed to approve his nomination before lawmakers left to campaign for the midterm congressional elections.

Diamond told a Senate committee during his nomination hearing in July that a central theme of his research has been how the economy deals with risks that affect both individuals, and the entire economy.

"In all my central research areas, I have thought about and written about the risks in the economy and how markets and government can combine to make the economy function better for individuals," he said in that hearing.

Pissarides, a 62-year-old professor at the London School of Economics, said he received the news with "a mixture of surprise and happiness, general satisfaction.

"This is prize is so great you don't believe that you will get it even after you've got it," he said, in a live telephone conference with the academy in Stockholm.

The economics prize is not among the original awards established by Swedish industrialist Alfred Nobel in his 1895 will, but was created in 1968 by the Swedish central bank in his memory.

The economics jury was the last of the Nobel committees to announce 2010 winners.