The 2010 Nobel Prize for economics was recently awarded to Peter Diamond, Dale Mortensen and Christopher Pissarides for their analysis on “markets with search frictions”.
Complicated as this may sound, the core of this subject is fairly easy to understand and credits some economic hardships to the complexity of today’s trade systems. To understand, lets apply the prize recipients’ theory to the labor market. When an employer seeks a new employee, the search and hiring process requires time and resources. Even with the aid of intermediates such as consultants, the process will always take a toll. These factors mean that some demand will not be met while some supply not bought. And thus “frictions” are created in markets.
Such frictions can help explain the fact that many people may be unemployed at the same time that several job positions are available. In this manner, the Nobel winning Search Theory has been applied to monetary theory, the housing market and various other economic sectors.
No comments:
Post a Comment