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I remember seeing a nature programme once, in which a hunting lynx would chase its prey for a certain length of time before giving up - the time being proprtionate to the increasing energy cost of the chase, the reduce probability of success as it tires weighed against the reward of a kill.

Equally, a hawk diving on a flock of pigeons puts the whole lot to flight and then homes in on the best prospects.

I'm not an economist but I presume that a similar cost benefit analysis applies in seeking a job: and I guess that these laureats have an algorithm for the process.

What amazes me is that anyone ever thought is was any different.

So people should be taking the first job going and if they turn it down their benefit cut off? (Choice costs more!) Seems that you've re-invented slavery in the low wage sector but these things will necesserily take on a life their own. So how long before a fully fledged command and control (totalitarian) system emerges from this genius of economics?

Do these economists also take into account the value of networks, in that it is much easier to identify job opportunities when one is in work ad meeting people from one's own employer and employees of other firms? In times of recession employers know that if they advertise widely they will be deluged with applications that they will have no scientific basis for sifting and evaluating. They therefore actually restrict promotional activity to limit the number of applications they have to deal with. Those who are out of work and out of the information "loop" therefore have even less chance of successfully applying for those vacancies.

I would also be interested in the opportunity cost involved in accepting the first job offered. As the first job offered is unlikely to be at the same skill and knowledge level as the previous one there may be economic benefit in unemployed people holding out for a job at the same skill level as before. This may often outweigh the short trem costs of keeping that person on benefits for a bit longer. Is it a co-incidence that the economies with the best benefits packages have the highest skill levels?

In the UK we seem to have skilled people working in lower-skilled occupations and getting stuck there witrh their skills lost to the economy. Every taxi driver I get seems to have taken the job as a stop-gap till they got back in as whatever profession they left, and never did.

Not surprising. Getting paid in the PAYE system does not compare to getting paid in the CITP system [Cash In The Pocket].

I remember the one post that got me interested posting on these blogs and I believe that the writer should be considered for a nobel prize of some description.

Mr Writingsonthewall, with the help of his good lady, devised an experiment to determine the velocity of money and he came up with a definitive answer.

I can't remember where exactly it was posted but perhaps he would be good enough to relay his method and the resulting data once more.

Please take my comments with plenty of salt; after all, maybe I'm just ignorant.
Peter Diamond, Dale Mortensen and Christopher Pissarides shared the 2010 Nobel Prize in Economic Sciences for their work on the efficiency of recruitment and wage complexities (and other labor-market regulation).
These economic laureates 鈥渉ave formulated a theoretical framework for search markets鈥�.
Peter Diamond has analyzed the foundations of search markets.
Dale Mortensen and Christopher Pissarides have expanded the theory and have applied it to the labor market.鈥�
The laureates鈥� models explain the ways in which
- unemployment,
- job vacancies, and
- wages are affected by regulation and economic policy.鈥�
Sure seems simple enough to me: low job vacancies = unemployment. Worker surplus = low wages.
Where鈥檚 my Nobel Prize?
Pissarides is an economics professor at the London School of Economics. He related job creation to the number of unemployed, the number of vacancies and the intensity with which workers look for jobs and companies recruit applicants. He concludes that the more eagerly job seekers look for work, the more jobs companies are likely to offer because it will be easier to fill them.
What?
A company cannot offer more jobs than it has no matter how many people are looking for work, making recruitment easier.
Mortensen is a professor at Northwestern University. He pioneered the study of how workers search for jobs. He found that labor-market rigidities can cause unemployment as job- seekers look for the best work at the highest pay. The intensity of that job search determines how long workers stay unemployed and in turn can be affected by changes in the level and duration of jobless benefits.
Excuse me...
Isn鈥檛 it logical that workers would first seek the best work at the highest pay; then, as time goes by, drop their expectations and decide flipping hamburghers doesn鈥檛 seem quite so bad?
Diamond is an economics professor at the Massachusetts Institute of Technology. He has researched a wide range of subjects, including the long-term impact of the growing national debt on the economy.
How much research did this take?
Increasing debt, increasing loans鈥ankruptcy comes to mind.
President Barack Obama chose Diamond for a post on the Federal Reserve Board in April, subject to confirmation by the Senate. The nomination was returned to the White House because at least one unidentified senator objected. Obama resubmitted Diamond鈥檚 name on Sept. 13. Maybe this lone Senator was thinking somewhat like me.

It seems to me this is just one more tiny step down the road of treating human beings as 'things' instead of people.

SF wrote:
"Search theory has provided plenty of ammunition to pro-market reformers over the years: among other things, the theory teaches that when it comes to unemployment benefit, you can have too much of a good thing. Generous benefits with no time limit give people less incentive to take the first job offer - so they end up spending longer out of work, even if the job they end up with is no better than the first."
---------------------------------------------------

This could only be suggested by economists who by definition have never had a real job.

We're reverting to attitudes from the days when slavers referred to their cargo as black cattle. These are people, not lab rats. Treat them with more respect.

91热爆 91热爆 Page today: 91热爆 deputy boss Byford "to leave" [sic]

Salary 拢475,000. (Gasp.)
Is he required to take the first job he is offered?
Or, does this attitude not apply to people of elevated status?

Stephanie; I think you have let your profession down here, along with these eminent economists. (Bad Joke!)

Obviously a summary of their observations might have been rather long for a simple blog - after all research that leads to a Nobel Prize is likely to be rather longer than a few pages of A4, but some clues about their principal conclusions might have been worthwhile.

From personal experience (and one sadly currently being experienced by another family member) one reason for job seekers not taking jobs all that quickly is simply that employers who have advertised a vacancy, and to whom one has taken the trouble to write complete with a CV, rarely bother to reply. Did this illustrious trio include that in their calculations, I wonder? How can anyone take up a job when their interest is not reciprocated?

Somewhere in all this there is clear scope for some new "economist" jokes.

might not be relevant but if two people we marooned on a desert island and one person could only forage for enough food to sustain one person do you think one of the two would sit and sunbathe

Awhh!....c'mon Stephanie, there is a far more subtle analysis of exactly who has won the most Nobel prizes.

The ethnic group from which (by proportion...and by some considerable margin) that most of the worlds Nobel prize winners come from, represent just 0.5% of the UK population, and only 2% of the US population.

Let me give you a guess.

Can you guess who they are?

Let me try to understand their great breakthrough in economics... What we are seemingly being told that there is hysteresis in economic systems. I would have thought that that was almost blindingly obvious.

I wonder if the 200 economists at the Bank of England will find this theory useful in their job hunting - he is a hint don't tell anyone your an economist!

As they all seem to have interesting and well paid jobs I can see why they are all laughing (their way to Norway). I think most of the above contributors have sized these guys right.

Knowledge about the existence of hysteresis in labour markets is nothing new. What these guys have done (especially the LSE prof) is explain how this hysteresis links up with other mechanisms. Now that is clever!

Here's a follow up to post #12

Which ethnic group has been THE PRIME driver of equality/racial/female/human rights legislation and follow-on 'political correctness' over the past 65 years?

Hint! It wasn't a bunch of 'wimen' at Ford's Dagenham manufacturing plant!

If you lose your job it could be a while before you find another.

I'm living the theory! Can I have a Nobel prize for practical application of prize-winning theory? How much does a Nobel prize fetch on Ebay, anyway?

I thought you had just been to the IMF conference Stephanie. Do you have nothing to say about it? I would have thought it was worth noting its failure.

Oh perhaps the US employment report? Or the pick-up in producer price input inflation?

As for this article we could have googled it ourselves.

You call economics a profession? Economics is no more a profession than astrology is a profession.



So much for Nobel Prize winners. Economists in the 1930s may not have had fancy computers and elaborate models and theories but they knew a hell of a lot more about how markets work than modern economists who seem to spout everything but know nothing. And they created an economic system that was relatively stable until the economic brains of the 1980s, 1990s, and 2000s with their computerized models and Nobel Prizes took out all of the props that their predecessors had so carefully put in place to prevent another great depression.

If engineers were as competent as economists, most people would be too scared to drive to work every morning for fear that an overpass they travel on would collapse right out from under them.

"There's something about markets I don't understand"

Alan Greenspan testifying before Congress in late 2008 after his bubble burst and the entire economic house of cards he and his fellow "economists" left us with didn't "come down to earth" but crashed and burned in a gigantic conflagration conflagration. It was just like the burning of the Von Hindenburg. Oh the humanity! The humanity!

The only thing that keeps economists on anyone's payroll is short memories.

On a more interesting topic than three economists wining a biased prize from a biased organisation..... Controversial or what?

Did you you see the Interactive: Economic disjunction within the eurozone in the FT Online yesterday.

Quite amusing but rather distorted as it had Ireland as being well placed in as much as competitive labour costs/productivity and its account balance. The same can be said for the majority of the eurozone countries. However what I did find interesting is that this graph now shows the German economy worsening over the comming years IE 2015 after growth in GDP of more than 4% year on year from 2009 to 2015. Not to sure where they got their figures from but they do not match those being used by Germany, ECB, IMF and many others. In fact it is now expected that the Germany economy will flat line at around 1% to 2% at best for the next couple of years with some indicators showing a possibility of a slip back into negative growth, yes the dreaded "R" word.

The issue still lies with the Euro and the Eurozone. There are too many skeletons in the cupboard and no matter how you look at them they all have to be addressed before things can get better. The Euro at best can still be classed as being on the abyss but yet there is still talk in Brussels about enlargement. Just what you need when your currency is about to go down the pan. More countries on the periphery who's economies are not as well developed and stable as the main player in the Eurozone.

It now surely has come down to a question of how do you deal with the situation. So what are the ECB / Eurozone countries going to do, or to rephrase the question what is Germany going to do as it is they who have the finacail clout alone in the Eurozone at present. The other club members are at best not going to be an issue at worst not going to be able to afford the clubs membership fees. So do you let these members defer payment possibly indefinitely, do you lend them the fee or do you ask them ever so politely to leave?

Whatever option is taken the Euro experiment has been inextricably been harmed, for its weakness is now known by all and unless there is to be a much stronger tie between the Eurozone countries this weakness will remain.

And we should remember in the immortal words of Gerry Adams "they have not gone away", the PIIGS that is......

#20. Chris London wrote: pr茅cis: an attack on the Euro

Everything you say can be applied with bells on about Sterling.

The one thing about the Euro (or the US Dollar, or the Yuan for that matter) is that the same currency is used by a huge number of disparate and different peoples spread over a large area. The value and strength of these currency areas is that there is no uncertainty in doing trade and business. This uncertainty of return and cost when using multiple currencies is a huge impediment to growth (the recovery) and trade. (Or perhaps you think that Bankers should take a huge proportion of every commercial or personal transaction just for exchanging money between currencies?)

We in the UK have a huge and once in a generation opportunity to benefit ourselves by gaining from the certainty of the single European Currency - if we squander it we are condemning ourselves to an ever downward spiral to becoming a third world country - it is as stark as that. The reason that now is the right time to join is that the opportunity may still be available.

We should have joined at its inception for sound reasons of trade and I think that the only reason that the well made plans of the Bank of England were thwarted was that the Blair/Brown government was suborned by the bankers. Are we to have the whole Nation destroyed again by the bankers? If we do not join it is capitulation of the whole state, people and democracy itself to these non-productive money grabbers.

The present time is a good time to join precisely because of the stress within the Euro as this affords a reasonable exchange rate for us that will ensure a competitive platform for us to develop the 70% or our external trade with Europe and make it truly part of our home market.

Poor old watriler does not seem to know that the Nobel Foundation is based in Stockholm which is still the capital of Sweden. Anyway I am sure the three economists continue to smile.

21. At 09:11am on 12 Oct 2010, John_from_Hendon wrote:
We in the UK have a huge and once in a generation opportunity to benefit ourselves by gaining from the certainty of the single European Currency

John, how do you solve the problem that each country decides it's own fiscal policy ? If, on the one hand, you have the European central bank determining the price of money and on the other each individual country taxing and spending according to their own political persuaions and not tying very hard to stay within arbitrary debt to GDP ratios, the whole system is put in peril.

How do you get round that ?

21. At 09:11am on 12 Oct 2010, John_from_Hendon wrote:
Everything you say can be applied with bells on about Sterling.
=========================================================================
I can't see any similarities between Sterling and the Euro. We can to a certain extent manipulate Sterling the member states of the Eurozone can't. We have control over our budget the Eurozone members do not.

Unless you are replacing the Eurozone members with Germany. For it is they alone who are currentley holding the whole thing together. It was they who bailed out Greece and it is they who is now being looked to with regards to the other PIIGS.

Unless you have a United States of Europe with one central goverment then the Euro will always be at risk from the weaker members.

Now of you ask me will there ever be a "USE" the answer has to be no. Can you see the Germans, French, Italians Etc. Etc. being told what to do from Brussels, it would be total anarchy.

What the EU should be is what it was envisaged to be and that is an open trading group of countries. Anything more will always be a disaster, just look at what we have now. An entity that can't even get its own finances in order. So bad are things that they have not had a set of accounts signed off for sixteen years. Try that with your own company, I am sure that the HMRC would be understanding. Would you invest in a company that can't balance its books and has not been able to for sixteen years, yes 16 years. Oh sorry you do want us to.....

Stephanie

Not sure I agree with you that 'search friction' economics really does refute the extreme neoclassical view that unemployment is caused by not matching the right jobs to the right people ie people are jobless by choice. If anything, it can offer support to that pernioious idea. I think what is more telling is that the Nobel people did not give the prize to any economist who got close to forecasting the worst financial crisis since the Great Depression but to economists who have done rather more obscure work on 'friction' using mathematical models. Did the crisis happen?

Forcing unemployed people to take the first job offered by withdrawing benefit would mean that many people would end up in jobs which do not use more than a part of their potential ability. This means that the economy is functioning below its potential, given the skills and abilities of the workforce.

If labour market conditions are such that jobs, which make use of most of workers' abilities, are difficult to find, then this should be rectified by encouraging more enterprises which use skilled workers to start up.

This work could result in a new type of web-based search engine, which attemps to correlate people with jobs in a very sophisticated way.

However, the magnitude of the task may be demonstrated by the following example:

In the early part of this decade, the telecoms companies setting up 3G networks across Europe had, in theory, a difficult job to fill, namely, finding people who were skilled at the installation, configuration and initial operation of these systems, complicated by the fact that the 'always-on' nature of these systems meant that hacking attempts were likely to occur almost from the minute they were switched on.

So, in theory, the few telecoms engineers who were capable of doing this type of work should have been able to look forward to a few years of steady employment.

In fact, due to an event that was completely out of that technical arena, they mostly remained under-employed during this period.

That event was the decision by the UK Government to hold an auction for the 3G licenses, which raised 拢22 billion.

Other Governments in Europe saw what had happened with the successful auction and they then demanded 'license fees' from the telecoms companies for their domains.

Pretty soon, the telecoms companies found that large portions of their budgets had been spent on licenses and limited amounts were left to actually roll-out the 3G systems, leaving the engineers on the proverbial bench.

So, the challenge of matching people to (potential) jobs has to take into account a very wide range of factors.

Professor William (Bill) Mitchell of the 'CofFEE' Institute is an expert on unemployment. I asked him what he thought about the work of these Nobel Prize winners, and he replied:

"Their work has made it harder for governments to maintain full employment and their analysis 鈥� which is full of holes and misrepresentations has been used to justify supply-side policies which deny mass unemployment and which focus on the victims of the job shortage rather than the true cause.

They are worthy choices for a Nobel Prize 鈥� so bad is their work."

I'm with Bill, these prize winners are just unemployment deniers in my opinion.

Let us continue to blame the working people for the recession. No need to hold the bankers or governments accountable. Those lazy working folks who keep everything going are just laying around waiting for the next government payment. No ambition in the working class or they would be wealthy. Oh, the economic theories are such fun to read. Tend to be like religion, more faith than facts. So what if someone returns to work at the same level that they left. Why would that matter? After the banks stole the personal wealth of millions of people they may be reflecting on the incentives to acquire more when it can simply be taken away again. This constant drum beat that it is the workers who are the problem, pensions, benefits and such, are simply the cries of big business wanting the same profits of the era of the bubble that had no basis in reality. I guess they are saying that if government benefits were eliminated than people would starve to death and there would be less unemployment. What a good idea!

Does 'Nobel prize winner' mean 'idiot in a brown suit' these days or something?

Why haven't we burnt these witches at the stake?

After attending a few speeches at the LSE in my spare time and hearing from some of the most important economic decision makers in our time - I have realised that they really don't have a clue.

How can any of them know about unemployment when none of them have experienced it. A quick internet search reveals that all these clowns went straight from university into advising some Government organisation or educational institute - clever they may be - expereinced they are not.

You have to be unemployed and understand what it's like to get your hopes up for a 拢30k a year sales job, only to discover after you sail through the interview that it's an O.T.E. figure and you need to sell thousands to even reach a fraction of that total - or the drudgery of the dole office where someone less qualified than you is lecturing you on how you should conduct yourself at interview (even though you wonder how they ever got their job with their poor person to person technique)

I think there is a well used metaphor - which is that in order to understand something you need to experience that something (a logical argument as to why God cannot exist as depicted by religions) - and Economists are proving this day after day after day.

There are clowns...
There are funny clowns...
..and there are nobel prize winning clowns.

This prize was utterly devalued when they awarded it to Hayek or Friedman (in 1976)....or the two 'super intelligent' Merton and Scholes - who's sheer genius almost brought down the world Economy (again) - it seems this prize is more the Economics booby prize - awarded to stars who turn out to be idealistic chumps - confused by their lack of mathematical knowledge and simple application of logic.

You can see the effect of the 'genius' of the first two in action today - for the lassez faire approach to markets is exactly why the banks ended up blowing themselves up and nearly taking us all down with them.

Stephanie; it cannot have escaped your notice that most if not all commentators have expressed a pretty jaundice view about this. C'mon; at least give us an "executive summary"!

Picking up on one sentence in your article: "Generous benefits with no time limit give people less incentive to take the first job offer - so they end up spending longer out of work, even if the job they end up with is no better than the first." Taking this to mean what it actually says you seem to have overlooked the really hard bit is between finding yourself in need of a job and then getting any job offer, never mind the first of several.

In my earlier posting I stated that just getting prospective employers to reply to applications could be a frustrating process contributing to the overall gap between periods of gainful employment. Then of course why would anyone rush to apply for a job that would require relocation which would result in disrupted schooling for offspring and perhaps a partner having to give up his or her job as well? Not that every employer offers relocation packages anyway, and who would pay for a relocation if the job on offer paid less anyway?

Another major obstacle is that employers are often very reluctant to employ someone on a lesser salary than the one they previously enjoyed; they are only too aware that anyone engaged on that basis will be looking for the first chance to jump ship for a better offer. This is sometimes (often?) concealed by the weasel words "you are over - qualified".

In some ways I do feel a bit guilty heaping scorn on any conclusions the illustrious three have reached, but at the same time given the rather poor track record that economists as a species have, and the low regard in which they are held generally (by everyone with the possible exception of politicians, for some reason) I see no reason to take anything less than a cynical viewpoint of their conclusions (whatever they may be) and in some respects unalloyed derision may be more appropriate.

Let's have a summary!

Some one once said that economists are professionals that are wrong most of the time and yet are still considered experts. I find no evidence to the contrary.

It is disappointing to report that yet again we get significant news on inflation but no update on here. Indeed I have just heard 91热爆 fivelive call the inflation numbers important...

Is this an economics blog?

33. At 5:00pm on 12 Oct 2010, Amysmythe wrote:
...Is this an economics blog?
---------------------------------------------

I am sure we will here nothing of this either:

Go to

and follow the link to "The Gathering Storm".

33. At 5:00pm on 12 Oct 2010, Amysmythe wrote:

"It is disappointing to report that yet again we get significant news on inflation but no update on here. Indeed I have just heard 91热爆 fivelive call the inflation numbers important..."

The only importance those numbers give is the green light to the BoE to start printing again (I suspect they will take the lack of increase in the RPI as being deflationary) - in fact the city is now counting on it.

"Is this an economics blog?"

No - this is a distraction blog - to divert the questions that need asking into a dead end.

It's like the house prices - we'll see what next month reveals but if the Halifax figure isn't an anomaly - then this could be the beginning of the end.
I mean all this is connected - the massive paydown of mortgage debt, the reposessions, the lack of mortgage approvals, the severing of first time buyers, the falling equity and the fact that our consumption driven economy was being driven by equity withdrawl from property.

Now please don't act surprised when we dive into double dip - because the main source of 'income' in our economy (debt) has all but evapourated - despite the BoE holding down a record low for a record period

Only Economists, politicans and some deluded Captalists will be surprised.....the rest of us will have to 'act surprised' so we don't damage their fragile egos!

So why is is this blog entry not on the main 91热爆 business page then?

Nobel prizes for failed economists?

Let`s hear about foreclosure gate and the proposal to steal American`s 401k plans.

I`m really looking forward to your economic insights on those topics Stephanie :) :) :)

I don't buy the idea that so many economists are incompetent, and couldn't predict what was about to happen. Some of them, perhaps. It seems unlikely that people who devoted so much time to studying something could fail to understand it. It seems incredible that even if they did, they would still manage to find their way to prominent positions. I don't rule it out, of course - there's always the 'useful idiot' theory.

What little I've learned from reading the scraps of economic theory I've encountered suggests to me that often economists (or at least, the ones that write tracts that get adopted as the basis of government policy) typically devise theories that take advantage of people's ignorance of the (inevitably?) cyclical nature of capitalism in order to provide a cloak for certain political policies, or to push the economic wheel in a certain direction at a certain speed, or to influence public or political behaviour in order to enrich themselves or their friends.

Am I displaying a naive cynicism born of ignorance? Any thoughts, anyone?

(BTW, none of this talk of economists is meant as a reference to our gracious host blogger and editor. I'm speaking more generally, and I hope that if ever there was such a thing as an impartial economist, it would be a 91热爆 economist.)

Mirless thought (in his Optimal Taxation stuff) that a surprisingly large number of people are so unhappy in work and capble of earning so little, that the sum of human happiness would increase if they were supported by taxation on others.

Whilst eliminating unemployment, the withdrawal of benefits entirely would result in a much more unhappy society. The rich would be happier but the poor hugely unhappier.

Anyway it is not just lefties in the chattering classes who know that the jobs the presently unemployed will be forced to do, should be done by thiose whom David Starkey calls the idle undeserving rich and their sponger genteel poor relations. People on the sink estates know it too.

Some people would prefer to be truly and deeply unhappy and take poor;ly paid jobs wholely wrong for thme than starve. They would be happier on benefit and so would we for them.

To get a Nobel Prize for saying that some starving people will work for scraps, just as the post credit crash Toryism sweeps the world, is to say that that Nobel judgements are inevitably political, just like the G20's. What Pissarides has proved has a whiff, nay, the overwhelming odour, of the wholly obvious.

Aren't you being too kind to him, Stephanie? 'Search Costs' unpack easily as 'Should look harder - on your bike'.