OK, good morning, everyone.
I think we're ready to get started morning.
Thanks for coming and welcome to MIT.
My name is Nate Nickerson, I'm the Director
of Communications for MIT.
In a moment on I'll introduce President Susan Hockfield
who will offer remarks.
She will be followed by Professor Diamond.
And just a note on mechanics for the press, Patti Richards,
Director of Media Relations for MIT
will moderate questions for Professor Diamond
after his remarks.
And now I'd like to introduce Susan Hockfield,
President of MIT.
[CLAPPING]
Good morning, everyone.
It's a great morning.
I'm delighted to have the privilege of announcing
that Peter A. Diamond, Institute professor
and professor of economics at MIT,
has been awarded the Nobel Prize in Economics Science for 2010,
along with Dale T. Mortensen and Christopher A. Pissarides.
As a professional economist, Peter
has embraced the role of public citizen,
conducting highly influential research
over five decades on a remarkably diverse range
of subjects from taxation, public debt, social security,
and other forms of social insurance,
along with his work on markets for which he has been awarded
this year's Nobel Prize.
Peter has been a leading intellectual citizen
at MIT since his days here as a graduate student,
having received his MIT PhD in 1963.
He, himself, has provided over 50 doctoral dissertations,
talk core graduate classes in economic theory and public
economics, and collaborated extensively
with colleagues on his high impact research program.
He's been an active citizen of the MIT community.
He's served on the Presidential Search Committee,
and deployed his expertise on a recent committee
from the university addressing employee retirement programs.
He served as the head of the Department of Economics
in the 1980s.
Now after a career of service through which his scholarship
has served the country, Peter has an opportunity
to serve more formally having been nominated
this year by President Barack Obama
to be on the Board of Governors of the Federal Reserve Bank.
Peter has previously received a huge host of awards and honors
over the years.
He's the first holder of the Paul A. Samuelson Professorship
of Economics named to that position 1992.
He was named an Institute Professor, our highest
professorship, in 1997.
He received the Killian award from this community in 2003.
He's received Guggenheim's and Fulbright fellowships.
He's a fellow of the National Academy of Arts and Sciences,
and a member of the National Academy of Sciences.
Peter now becomes the fourth person
to win the Nobel Prize as a member of MIT's Department
of Economics, following his distinguished colleagues Franco
Modigliani in 1985, and his dual graduate advisers, Paul
Samuelson, who won in 1970, and Professor Robert M. Solow who
won 1997, who is with us today.
Peter is truly a citizen servant,
mirroring his extraordinary intellect
with a depth of warmth and human compassion.
In the spirit of the MIT economics department that
was set by Paul Samuelson and Bob Solow, ladies
and gentlemen, it is with pride, I
welcome MIT's new Nobel laureate in economics, Professor Peter
Diamond.
[CLAPPING]
Thank you, all.
Thank you for those lovely remarks, Susan.
Obviously, I've got to start with elated,
delighted, honored.
It's a wonderful day.
It didn't start out wonderfully.
I was on the red eye.
I only learned about this on Storrow Drive on my way home.
And the red eye from San Francisco
was the last leg of a trip that started
in Queenstown, New Zealand.
So if I fall asleep during my remarks,
I hope you will all forgive me.
I'm delighted that Bob Solow is here--
my mentor, my thesis adviser, a model for me and many others.
And Risha Samuelson, of course, we were all sad
that Paul couldn't be here.
Paul laid out wonderful things, wonderful ideas,
wonderful interactions.
MIT economics department and MIT generally has just
been a perfect place for me.
I've stayed around this long, not
because I couldn't find another job,
but because I couldn't imagine a better job.
So I'm delighted that I actually got back today in order
to do the press conference and do this all properly.
I think that's enough.
Patti?
Thank you all for coming out today on a holiday.
We're going to take some questions from the audience
and we also have a phone bridge, which is hopefully working,
so we'll take calls as well.
We start with a question from the audience and you identify
yourself, please, when you--
Greg Wayland, NECN.
Professor Diamond, I still don't think
we've heard your reaction, your real reaction to having
received this honor and why you think
you've received this honor.
I think you heard my reaction-- elated, delighted, honored--
I could string another sequence of adjectives along there,
but I think that captures it.
I did have a moment to glance at the statement by the Nobel
Foundation that this is for the analysis of markets
with search frictions, markets that don't work ideally,
that's realistic.
And there have been multiple applications,
but the particularly important one important in these times,
is around unemployment.
I notice that Chris Pissarides, one
of the co-laureates, and more important,
one of the important coworkers, in search theory applied
to labor said at the conference in Sweden
that it's so very important to get people back to work,
because when people are out of work too long
it breaks the connection to the labor market.
It makes the economy function poorly thereafter.
So the more rapidly we can get the world economy growing
faster, the better.
We'll take the next call from the phone bridge.
I believe Mark Pratt, are you there?
Uh, no I'll refer to Steve [INAUDIBLE].
OK, from Associated Press?
Hi, Professor.
I wonder if you could tell us again how you learned about it.
You said you learned about it coming
from a red eye from San Francisco,
you heard about it on Storrow Drive.
Can you tell that story a little bit more
and what you're reaction was at that time?
My wife and son Matt, who is here, picked me up at Logan.
And we were driving back, they had not said anything.
And I won't speculate in public as to why.
And my cell phone rang and it was my good friend Nick
Stern calling from London.
He's a colleague of Chris Pissarides at LSC.
And so he had heard about it and he called to congratulate me,
and then was rather flabbergasted
to discover that it was from him I had learned about it.
Can you tell us your initial reaction?
I think a lot of people wonder-- I mean,
not that a lot of people are going
to get this call-- but a lot of people-- especially
those of us who aren't going to ever get that call-- wonder
sort of what that's like.
Well, fortunately I was sitting down
and I wasn't behind the steering wheel.
And it kind of takes your breath away.
It's just you suddenly realize not only is it the moment,
but also there were all sorts of changes in your life,
opportunities opening up, all sorts of things
that are going to be different.
And so you kind of hold your breath for a little while.
Thank you.
I believe we have a gentleman on the phone from Science
Magazine.
[INAUDIBLE] if I might ask a quick question
about a little bit more technical.
So my understanding is that you developed
essentially a mathematical model, differential equation,
to take into account the costs of searching
for the correct employee.
I guess my question is these frictions,
do these come in as bona fide friction
to the dynamical system?
Is that why they're called friction?
Yes, that's right.
Part of the thrust of my work in a number of rounds
is to pay much closer attention to how the economy plays out
in real time than in the simplest abstractions of how
markets work.
And so I've long been interested in how things play out in time.
And obviously in the labor market
it takes time for workers to find suitable jobs,
it takes time for employers to find suitable workers,
and that dynamic has a feedback into how wages are determined,
how efficient the economy is.
And so, yes, it was very much dynamic equations incorporating
a process of organizing the labor market,
but I also worked on a consumer goods market and models
of the economy as a whole.
And all of them, the dynamics matter for what
happens in the economy.
I believe we have Catherine Rampell from the New York
Times calling in.
Do I have that right?
Yes.
OK.
Hi.
This is Catherine Rampell.
Thank you so much for taking the call and congratulations,
of course.
I'm curious about what to think the applications of your work
are to current policy issues, in particular the question
of long-term unemployment.
What kinds of policies and frictions
instead of generally trying to put people back to work.
What are the actual tools that are implied by your research?
The focus of the research, paying attention
to the labor market, is really how things play out over time
and as Chris Pissarides said, the importance
of getting people back to work quickly,
and recognizing that it is indeed a process.
That the economy goes into a serious recession,
there are going to be people who are going
to be long-term unemployed because they don't find
something suitable in shorter times,
the number of vacancies relative to the amount of unemployment
goes down, it gets harder to find a job.
It's a stochastic process for most people.
And so with any stochastic process,
there will be realizations where some people find jobs quickly
and others find them slowly.
It is a common place in recessions
to suggest this time is different,
this time it's structural, this time we're not going back
to lower unemployment.
I think along with the Reinhart Rogoff book
when you hear this time is different you,
should be skeptical.