The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2010 was awarded jointly to Peter A. Diamond, Dale T. Mortensen and Christopher A. Pissarides.
Diamond, 70, is an economist at the Massachusetts Institute of Technology, and a specialist in Social Security. Bernie Madoff would have loved to have Diamond on his team, since Diamond completely ignores the Ponzi like aspects of Social Security and tinkers with "fixing" the scam. Going beyond Madoff, Diamond then ignores the coercion involved in SS. He focuses with tunnel-like narrow vision beyond the coercive aspects, and Ponzi like aspects, to pontificate in numerous journal articles and books about how to "save" SS, including recommendations to cut "benefits" and aggressively increase SS taxes.
With this absurd background, President Obama has nominated Diamond to become a member of the Federal Reserve. The Senate failed to approve his nomination because of Republican foot dragging, before members adjourned to campaign for the midterm congressional elections.
In an apparent effort to prove his cluelessness goes beyond SS and that he doesn't understand the proper methodology of economics, Diamond was elected a fellow and has served as President of the Econometric Society. Econometrics is a faulty method of economics whose followers blew up the hedge fund, Long Term Capital Management and the sub-prime mortgage industry.
Mortensen, 71, is an economics professor at Northwestern University in Evanston, Illinois. He studies frictional unemployment. This is like studying half time in a basketball game. Yeah, it exists, but it is a pretty simple concept that doesn't tell you much about the game. Frictional unemployment simply means that if someone loses a job, it takes them time to find another job.
Mortensen along with Pissarides (who is 62, and a professor at the London School of Economics) and, to some degree, Diamond have taken the simple concept of frictional unemployment and put it in mathematical form to create search and matching theory. There appear to be no successful practical applications for the Alice in Wonderland equations created. Their only valuable input is one we have been pointing out here regularly: "that more generous unemployment benefits give rise to higher unemployment and longer search times."
Outside of this obvious point, these guys have no real insights that can help anyone understand the economy and one of them. Diamond, is near the controls of the greatest Ponzi scheme the earth has ever experienced. I would be objecting less if the award was given directly to Madoff.
In summary, the Nobel Committee could have only done a worse job by giving the award jointly to Alan Greenspan and Ben Bernanke.