Congratulations to Peter Diamond on Winning the Nobel Prize in Economics

The first time I met Peter Diamond, nearly 20 years ago, I was a prospective student visiting MIT. He was wearing sandals without socks as he taught a graduate class. I remember thinking that was odd. As I sit here in my office, I am wearing sandals without socks. Perhaps Peter Diamond influenced me in ways I never imagined.

I was delighted to see that Peter Diamond shared the Nobel Prize today with two other economists (Mortensen and Pissarides, whom I don’t know personally but are very highly respected). Diamond’s intellect was legendary when I was a student at MIT. In his research, he worked on very hard problems. He wrote the kind of papers that I would have to read four or five times to get a handle on what he was doing, and even then, I couldn’t understand it all. (For more on the specifics of these papers, see Tyler Cowen‘s post at Marginal Revolution.)

Early in my graduate career, I wanted to be an economic theorist. My advisor at the time told me I should give a copy of the paper I was working on to Peter Diamond for comments. I was terrified, but I did it. It was a paper on crime, and a key assumption one always has to make in theory papers about crime is whether one wants to include the utility the criminal gets from committing the crime when adding up social welfare. Early in the paper, I noted that I would not be including the criminal’s utility in the social welfare calculation. Diamond highlighted that sentence, wrote that he thought I should include the criminal’s utility, and read no further in the paper. When I met with him, he simply said there was no point in reading any more once a bad assumption has been made. That’s not the way I think of the world, so that simple offhand comment he made twenty years ago has always stuck with me.

The single most memorable moments with Peter Diamond always occurred in seminars. Diamond often would fall asleep in seminars, often for large chunks of time. What was amazing, however, is that he would open his eyes and then make by far the most insightful comment of the entire seminar! He also did something in seminars that almost no other economist does: he both posed tough questions that would undermine the entire thesis of the speaker, and he would provide the speaker the answer to the very question. Academic economists are far more adept at poking holes in other people’s arguments than in constructing solutions, at least on the fly. But somehow Diamond was able to work out in his head complex models that would take others days or weeks and reams of paper to solve.

Since I left MIT, the thing that has struck me most about Diamond is his kindness and grace. When I would see him at academic conferences, he would always go out of his way to greet me, and he was always eager to talk about any subject at length.

The one thing that puzzles me is why in the world would he want to be on the Board of the Federal Reserve? One thing economists just don’t understand are people’s preferences.


Ratna

This article just epitomizes the problem I have with most brilliant academic economists, some of who win Nobel prizes, and their brilliant economics, some of which wins them Nobel prizes: they are brilliant, they dazzle folks at seminars, in the classroom, in meetings, they are occasionally kind people, but WHAT'S THEY SO-WHAT OF WHAT THEY DO? They solve hard mathematical problems -- but SO WHAT?! They make them up out of thin air, razzle-dazzle the world, and then cannot even run a household budget. They're constantly explaining economic debacles after the fact. They are all failed rocket scientists. Their big brains get bigger, but, what's the utility to the rest of the world?

The Nobel committee should look into honoring _practicing_ economists. How about someone who, toiling away at investment research, predicted the Great Recession? Nah, too practical. Too few assumptions, where's the triple integrals, no group theory, we can actually understand what they write. They have testable hypotheses. Yecch. Plebian stuff.

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Kamal

I think Diamond is a brilliant man and he deserves his Nobel prize. However, what bothers me is that we have so many brilliant economists and the US economy has its problems.

Regarding the unemployment issue, in the few years if the US economy worsens and the unemployment rate is say close to 50%, I am sure some other brilliant economist will come out with a paper that will show using equations that nobody will understand except fellow professors from MIT and princeton, that how 50% unemployment is quite normal - all part of market 'friction' and shows how 'free' economy works effectively and will win a Nobel prize.

William

However, what bothers me is that we have so many brilliant economists and the US economy has its problems.

That's because politicians apparently think many of these brilliant economists are unqualified.

Saber

I am really really glad that Diamond won the prize. He has made invaluable contributions to quite afew fields and his papers have become standard textbook materials for long time.

Bill

As a follow up to your comment: " When I met with him, he simply said there was no point in reading any more once a bad assumption has been made. That's not the way I think of the world, so that simple offhand comment he made twenty years ago has always stuck with me."

You aren't troubled about using bad assumptions in your own theoretical work?

Ahmad

I think what Levitt's view on that "bad assumption" is that its not "bad" so much as it is "different" or to quote Freakonomics - "unconventional." I think that when reading any Levitt or Dubner material, you have to approach the material with an open mind.

MW

I also once had a professor (Jerry Ostriker) who would sleep during seminars and wake up at the end to ask devistatingly pertinent questions.

In my part of the world (New Zealand), without socks is the standard way to wear sandles. Wearing socks with sandles marks you as a fashion-blind nerd and invites ridicule.

Spooner

I must be way too old. When did people--other than the occasional loonie--ever wear sandals WITH socks? In the 1950's and '60's people never wore socks with sandals. (I don't know about the time after that.) The purpose of wearing sandals was to get the feet exposed to the air; socks would have defeated that purpose. Anyone else remember sandals in the '60's?

Yusuf

I think the bad assumption comment really means that, just because an author makes one bad assumption, doesn't mean that you can't extract SOME relatively valuable information from the rest of the paper.

For example, half the papers I read in my economic classes were assigned precisely because they messed up in their method or assumptions. They still often raised interesting questions. However, in Diamond's position as an outside reviewer, it was probably an okay strategy.

nastya

I agree-practicality + big brains & theory just get the nobel. Nancy Qian? Banerjee?

Charlie

In my part of the world (UK), without socks is the standard way to wear sandals. Wearing socks with sandals marks you as a fashion-blind nerd and invites ridicule.

MW (#7) said what I was going to say. There should be no need to say "without socks" when describing someone wearing sandals.

Ernie

I am stuck on the sandals without socks comment. If you had said he was wearing sandals, that, to me, would have indicated he was not wearing socks. Only in the Pacific Northwest have run across the eccentrics that feel the need to wear socks with sandals.

Brendan

Yeah the sandals / socks reverse mind trick distracted me from everything you had to say about the Diamond geezer. People who wear sandals with socks are (justly) ridiculed. Everyone knows this. It's freakish not to know this.

Sal

Only Americans from the mid-west wear socks with sandals. And maybe a few Scandinavians.

Jane

Sandals without socks? OMG! I bet he wore bermuda shorts without thick tights underneath too. I just hope he wore his underpants on top of his trousers.

Spooner

I'm guessing Levitt was a super geek in high school. His mother probably made him wear socks to protect him from diseases.

Bazz

"....he thought I should include the criminal's utility, and read no further in the paper."

Very Interesting but accurate analysis of your ignorance!
STUDY
Enron,
the military in selling hammers to US Army for $1000,
any unfound criminal --- Innocents convicted
Madoff's life - 20 years with a great life
Muslim suicide bombers
Mafia ( the "Godfather" was a parallel state)
Sparta
All have successful criminal utility ( even if short term)