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.