Labor Rewarded

AuthorPrakash Loungani
Positionan Advisor in the IMF's Research Department.

NOBEL Prize awards for economics sometimes contain a touch of whimsy: they honor people with opposing views—such as the 1974 award to the left-leaning Karl Gunnar Myrdal and the libertarian Friedrich August von Hayek—or reach back to recognize academic achievements long forgotten. The 2010 award was given to a like-minded group: it recognized Peter Diamond, Dale Mortensen, and Christopher Pissarides, whose research coalesced in the 1990s into a workhorse model of unemployment and the labor market. And the time was right. In the aftermath of the Great Recession, 200 million people across the globe were unemployed, and getting them back to work was the most urgent economic policy task.

For Pissarides, a Cypriot of Greek descent, understanding unemployment has been his life’s work since the 1970s. It took 20 years of academic toil before the impact of his research started to transform the way economists think about unemployment—and then for its influence to seep through to policy. IMF chief economist Olivier Blanchard, a noted scholar of unemployment himself, says: “Chris persevered. And history has proven him right. There is an important lesson to researchers here. When you think you are right, don’t listen too much to others.”

Today, with everyone listening to him, Pissarides can use the bully pulpit afforded by the Nobel Prize to help address the unemployment crisis in Europe. He has supported some policies of the so-called troika of lenders—the European Commission, European Central Bank, and International Monetary Fund—but has been an outspoken critic of others (see box). He has been particularly active in his home country of Cyprus, where as head of the national economic council—akin to the Council of Economic Advisers in the United States—he advises the president on issues ranging from bank restructuring to the business model for Cyprus in the future. “Cyprus has some 10 TV channels,” says Pissarides, “and they are all chasing me for my views. Sometimes I want to retreat to my university office and lock the door. But I know if I do that, I will regret it. This is the time to help.”

Prelude

Growing up in Nicosia, Pissarides excelled in primary and secondary school, according to his mother, Evdokia: “His teachers used to say he was top of his maths class. He worked for a long time.” Despite that excellence, Pissarides was turned down by five of the six British universities to which he applied, getting an undergraduate degree in economics at the University of Essex. Among those that rejected his application was the London School of Economics (LSE), where he eventually was admitted to do a Ph.D. in economics and now teaches. Pissarides is philosophical about the rejection: “I’m probably better off having gone [to Essex] because it was a smaller place and they paid a lot of attention to us. At LSE, I probably would have got lost very easily.”

With Ph.D. in hand, Pissarides returned to Cyprus to work in the research department of the central bank. But the fates conspired to move him back to the United Kingdom. While he was on a trip to visit his prospective in-laws in Athens in 1974, the government in Cyprus was overthrown, and the ensuing political turmoil prevented his return. He turned to his former teachers in the United Kingdom for help and within a year was ensconced as a faculty member at LSE. “I moved to London in 1976. I have not moved since,” Pissarides wrote in his 2010 Nobel lecture.

Matching game

The philosopher Thomas Carlyle once wrote: “Teach a parrot the terms âsupply and demand’ and you’ve got an economist.” Too much supply of a commodity should lead to a fall in its price, boosting demand and eliminating the excess supply. When applied to the labor market...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT