The Nobel award for economics this week went to three scholars of unemployment. It is a timely topic. Joblessness has risen to a depressingly high level in the US, while not falling much (from depressingly high levels) in most of Europe. Sadly, the approach of the professors – Peter Diamond (nominated for the Federal Reserve), Dale Mortensen and Christopher Pissarides – has little to offer.

Their topic is ”Markets with Search Costs” – in particular the ways in which employees and employers find each other and agree on wages. The Nobel Committee is pleased that since their work appeared, “the applied research on labour markets, both theoretical and empirical, has flourished”.

The theoretical flourishing is seen in impressive equations which explain the effects of what economists call imperfections on the labour market. Hard theoretical work is required because the starting assumption of market perfection – employers and employees know everything and there are no costs for changing jobs – is so unrealistic.