JONATHAN COHN OCTOBER 11, 2010
Peter Diamond, a 70-year-old economist at MIT, just won the Nobel Prize in Economics. Yes, that's the same Peter Diamond whom President Obama appointed to the Federal Reserve in April and whose confirmation Republicans have blocked.
(Click here to read Peter Diamond's plan to save Social Security, which he wrote for The New Republic in 1998.)
It's not clear which Republican or Republican senators are stopping his nomination at this point, as he's the victim of one of those infamous anonymous holds. But two leading suspects are Jim Bunning and Richard Shelby, both of whom voted against Diamond's nomination in committee and the latter of whom has raised questions about Diamond's qualification.
Shelby has acknowledged that Diamond is a "skilled economist" but has said he wonders whether Diamond has sufficient expertise in monetary policy--even though three sitting Fed governors, including two appointed by Republicans, aren't even economists.
Who is Diamond? He's among the country's most respected economists, as you might expect. According to the New York Times, he won the prize--which he shares with two other economists, Dale T. Mortensen and Christopher A Pissarides--for research on how markets break down when buyers and sellers have trouble finding each other.
A particular focus is labor markets and, I gather, Diamond later produced a key paper on unemployment that happens to be very relevant today. As (fellow Nobel winner) Paul Krugman wrote a few weeks ago:
Right now one of the hot topics is whether the apparent shift in the Beveridge curve signals a rise in structural unemployment--and Diamond wrote the seminal paper on the whole subject--the top result on Google scholar.
Diamond has been a staunch defender of social insurance and, during the late 1990s, collaborated with future-OMB director Peter Orszag on a proposal to maintain the program's solvency without privatization. He also wrote an article about Social Security for TNR. It's now available in the magazine's archive.
Maybe that's why some Republicans are out to get him. Or maybe his stellar intellectual qualifications and potentially unique insights into our economic situation simply don't matter to them.
By the way, I happened to be the person who edited that TNR article, so I can tell you from that experience, and some more recent interactions, that Diamond is a real mensch. He's also a well-known fan of the Boston Red Sox. Thus, the picture below, from when he threw out the first pitch at Fenway last year.
As you can see, he's a true lefty.
Update: I've added some more background details on both Diamond's confirmation saga and his intellectual background. Here's more on that, from Alex Tabarrok:
The 2010 Nobel Prize awarded to Peter A. Diamond, Dale T. Mortensen, Christopher A. Pissarides can be thought of as a prize for unemployment theory.
A key breakthrough was to realize that the problem was not how to explain unemployment per se but rather how to explain hiring, firing, quits, vacancies and job search and to think of unemployment as theresult of all of this underlying microeconomic behavior. Notice that the underlying behavior involves not just workers looking for jobs but also employers looking for workers so explaining unemployment would require a theory of job search, worker search and matching and each aspect of the theory would have to be consistent with every other aspect; i.e. how much workers search depends on how much employers are searching (e.g. advertising) and vice-versa and also on the quality of matching and all of these considerations need to be addressed together. It was Mortensen and Pissarides in particular, building on work by Diamond, who built just such a consistent model.
And Tyler Cowen:
I think of Diamond as the classic MIT economist, especially of the earlier, pre-Acemoglu generation. Lots of theoretical rigor, though sometimes his theory pieces don't have a simple or simply analytic punchline. There is greater concern with risk, and stability conditions, than you would see in a Chicago theory paper. There is a strong emphasis on the ability of government to implement welfare-improving schemes of the sort found in social democracies. The approach is quite technocratic -- solve and advise. Public choice and political economy considerations take a back seat. High IQ. Of the MIT economists, he has done the most to pursue the Samuelson tradition of having a universal method and very broad interests. His papers remain central to public finance, welfare economic, intermteporal choice, search theory, macroeconomics, and other areas. His policy impact on social security has been significant.