Prof. Diamond Wins Economics Nobel

MIT News Office

Peter A. Diamond PhD '63, MIT Institute professor and professor of economics, has won the Nobel Prize in Economic Sciences for 2010—making him the 9th person who earned an MIT economics degree to win. The prize comes as Diamond awaits Senate confirmation  on his nomination to serve on the Board of Governors of the Federal Reserve.

Monday morning, the Nobel Foundation cited Diamond and two other scholars sharing the prize, in part, "for their analysis of markets with search frictions." Diamond helped develop studies from the late 1970s onward that examined the ways markets function over a period of time. This aspect of economic research—search theory—has been frequently applied to labor markets in the years since in an attempt to see how the needs of individuals and employers are met.

In the 1960s, Diamond wrote a paper that became a widely used model of public debt. In the early 1970s, Diamond published widely influential work on taxation that outlined what kind of tax regime leads to the highest production efficiency available in an economy. By the late 1970s, Diamond had begun long-running research into Social Security, when he first served on a government panel analyzing the topic. Since then Diamond has written many papers on social insurance and co-authored a 2005 book, Saving Social Security: A Balanced Approach, with Peter Orszag, the Obama administration’s first director of the Office of Management and Budget. In Diamond’s analysis, Social Security is hardly rushing toward imminent insolvency, but will likely need some increased taxes and some reduced benefits to maintain stability a few decades down the road.

Diamond received his PhD from MIT in 1963—his thesis adviser, Robert M. Solow, also won the Nobel Prize in Economic Sciences, in 1987. Learn more about Diamond's work and the Economics Department's response.