The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2010
Peter A. Diamond, Dale T. Mortensen, Christopher A. Pissarides
Telephone interview with Christopher A. Pissarides recorded immediately following the announcement of The 2010 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, 11 October 2010. The interviewer is Adam Smith, Editor-in-Chief of Nobelprize.org.
[Adam Smith] Hello, this is Adam Smith.
[Christopher A. Pissarides] Oh, yes, hello. This is Chris Pissarides.
[AS] Oh, thank you so much for calling. So, ah, yeah, must have been quite a day so far?
[CP] Yeah! [Laughs] Amazing! I could never believe that change could be so sudden.
[AS] [Laughs] What were you doing when the call actually came?
[CP] Well, I've been trying to recover from a really bad cold. So the weekend, I was in bed. And then I started again this morning in bed. And, about ten thirty in the morning my time, I thought, you know, I have to get out and I have to do some work, I'm falling behind. And then, the phone call arrived and of course I haven't done a stroke of work since then! I could hardly speak, my voice, and so I thought you know, is this real?
[AS] Well, you seem to be holding up well. And, do you enjoy this sort of thing? Do you enjoy the publicity?
[CP] No one could say that they are not enjoying winning a Nobel Prize. [Laughs] Yeah, of course, I mean it's a great joy and honor and everything. It's what we're all dreaming for when we're allowed to have dreams!
[AS] And, you're both a British and a Cypriote citizen, and I think I'm right in saying you're the first Greek speaking Laureate since Odysseus Elytis in '79.
[CP] Probably, yeah. I was born and brought up in Cyprus, my family are there. I came over here to do a PhD and, when I finished, the political situation in Cyprus wasn't exactly welcoming for young men finishing their studies so I stayed on here to work. I mean I was also interested in academic research, but these two things combined made me stay in Britain.
[AS] But, I imagine the news will be welcomed in the Greek-speaking world as well.
[CP] Oh, yeah, I had such tremendous support. I'm really pleased actually by the support that I'm getting from both sides within Greece.
[AS] So, just turning briefly to the models for which you're being awarded the Prize, so these incorporate real-world situations, the frictions that real-world transactions suffer, into the mathematical models that are used to study the markets. What does that incorporation allow you to do? What do these models now help us understand?
[CP] It allows you to understand unemployment better, the foundations of unemployment, you know, sort of what goes to make unemployment, to tell me why the unemployment rate is what it is. Let's state it very simply: it tells you why people might lose their jobs – what might increase the probability that someone will lose his or her job, what might make it less, then how long they will remain unemployed. And then, what incentives there are to take a job again, for firms to create jobs and for workers to take those jobs. So it enables you to study all the processes involved and, especially, to study the impact of policy at each individual level.
[AS] So it helps you choose the correct policy?
[CP] Exactly, yeah, that's the idea behind it, that it will help you make a considered choice in the sense that it will give you all the alternatives and it will give you all the implications of choosing any of the alternatives.
[AS] And, are there already well-documented examples where the employment of, as they are called I think, the DMP models have allowed one to actually improve unemployment situations?
[CP] Well, in fact the best examples actually are probably from, well, your own country, if I should say Sweden ... [phone rings in the background] ... I haven't switched it off ... or Britain.
It's mainly, you know, for example, if you take the duration of unemployment, how long people remain unemployed after they lost their jobs, these models have really helped in the design of unemployment support policy, in the form of income support, and the incentive to take a job after unemployment. You know, the reason we have programs now that, after six months of unemployment, we have active policy measures, and they help in moving the people from the state of unemployment into employment, all those policies have really been influenced by what we're doing in the last two or three decades, really. You know, showing how these programs would have an impact on the incentives that workers have to take a job.
[AS] And, is this work, do you think, very much within the realm of economics pure and simple or does it extend into lots of other disciplines as well? Is it basically a collaborative exercise at this point?
[CP] No, the work is economics; at least it started as being economics. But, what it does though mainly, is to tell us how people come together, you know, like how a firm and the worker will come together, when there are some information imperfections about the quality of any job match that will take place. So, it's been applied to other economic situations like housing, for example, like house by a country. But it's also been applied to marriage, a man and a woman who come together, given that they don't know what the outcome will be once they move in together.
[AS] Yes, it's any situation where a long-term sort of bond is formed.
[CP] Exactly, yeah.
[AS] Ok, and what are you hopes for the work in the future? How do you see this developing? Are the models just subject to constant refinement as one goes forward?
[CP] The models have been refined quite a lot. I mean people still cite the original works, but nowadays there's been so much work on that – and both work with numbers, with statistics, but also theoretical work. I expect I will continue in that direction. There is also work being done on sort of broader ways of looking at jobs. You know, as part of the structural change in an economy, you know the change from industrialization, manufacturing jobs to the service sector. Those are related to what we're doing because again there is a sort of friction, market friction in going from one equilibrium, where you have a lot of manufacturing jobs, to another equilibrium where the manufacturing goods have been produced in low wage countries abroad, and at home you're mainly employing people in the service sector. There are many applications of the field taking place, and also many theoretical refinements taking place. This is an active area of research.
[AS] Ok, thank you. Last question. You've had a few hours now, not to think for yourself, I'm sure, but to talk to people. Have you managed to make any plans for how you might celebrate this evening?
[CP] No, in fact I haven't had time with saying earlier, "Oh, maybe we should go and have a good dinner," and all that. And, suddenly another phone call arrives, "Are you free later this evening for talks?" I don't know! But, I expect that there will be a nice meal in that time somewhere, yes!
[AS] Well, I'm sorry, you should be drinking champagne, not talking to me. So, thank you very much.
[CP] And some champagne, yeah! Plenty of time. [Laughs]
[AS] [Laughs] when you come to Stockholm we have the chance to interview at greater length, and I look forward to it very much indeed.
[CP] Yeah, of course, yes.
[AS] So, thank you. We look forward to seeing you in December. But, thank you for speaking to us now.
[CP] Thank you.
[AS] And, congratulations again.
[CP] Thank you, bye.
[AS] Bye, bye.
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