Diamond, Peter Arthur (1940-…), an American economist, won the 2010 Nobel Prize in economic sciences. He shared the award with the American economist Dale T. Mortensen and the Cypriot-born British economist Christopher A. Pissarides. They received the award for their work in markets with search friction. A market is a setting in which people trade goods, services, or resources. Markets with search friction are complex ones in which it is especially difficult to match buyers and sellers.
A labor market is a type of market with search friction. Search friction in such markets can be created by mismatches between workers’ skills and the skills businesses need or such policies as unemployment insurance. Traditional economic theory of supply and demand would predict that in a time of high unemployment, if an economy also had a large number of job openings, wages for workers would drop until companies began to hire and the open jobs were filled. The friction in a labor market, however, can keep people unemployed even when firms are looking for workers.
The work of Diamond, Mortensen, and Pissarides studied why more complex markets do not behave according to traditional theories. They created a mathematical model—the Diamond-Mortensen-Pissarides (DMP) model—to study these complex markets. The DMP model is used to study housing, labor, and other markets in which buyers and sellers cannot be easily matched.
Diamond was born on April 29, 1940, in New York City. He received a bachelor’s degree in mathematics from Yale University in 1960. He changed fields from mathematics to economics while a graduate student at the Massachusetts Institute of Technology (MIT). While at MIT, Diamond was a student of Robert Solow, who won the Nobel Prize in economics in 1987. Diamond received his doctor’s degree in economics from MIT in 1963. He taught economics at the University of California, Berkeley, from 1963 to 1966. He returned to MIT to teach economics in 1966.
