Episode Summary: Nobel Prize Press Conference for Christopher Pissarides

London School of Economics: Public Lectures and Events • October 11, 2010

Main Theme

This episode is a press conference celebrating Professor Christopher A. Pissarides’ Nobel Prize in Economics, hosted at the LSE. The session features Pissarides answering questions from journalists, colleagues, and phone-in listeners about his research, its impact on unemployment policy, and its practical applications in different countries.

Key Discussion Points and Insights

1. The Path to the Nobel & Foundational Work

• Pissarides' Initial Reaction (00:28):
  • Expresses surprise and humility about receiving the Nobel Prize.
  • "It still hasn't sunk in completely actually... It's mainly an honor, both for LSE as well. I mean, I've been a product of the LSE since graduate school."
• Nature of the Discovery (02:00):
  • Describes the challenge in economics relative to fields like medicine.
  • Emphasizes that the Nobel recognized the development of a theoretical framework for understanding unemployment, not a “cure.”
  • "It’s really more about developing a framework. Now, of course, you could do a framework and no one could use it and then it gets forgotten. But we're lucky enough that people use this one."

2. Explaining the Framework and Real-World Impact

• Roots and Motivation (02:20–03:58):
  • His work began amid rising unemployment in Europe in the late 1970s and 1980s.
  • Prior economics literature lacked a method to analyze persistent high unemployment.
  • The framework developed gives policymakers tools to analyze the impact of different policies on unemployment.
• Recent Recessions as Examples (03:55–04:50):
  • Contrasts how countries’ unemployment rates have varied during recessions, due in part to different applications of his framework.

3. Policy Applications and Recommendations

• Examples in Practice (05:01):

  • “The New Deal for the unemployed” in the UK is cited as a positive example of policy guided by the framework.
  • Recommends policies that prevent prolonged unemployment so individuals’ skills and work mindsets remain intact.
  • Scandinavian countries highlighted as having particularly effective, refined policies.

• Addressing Youth Unemployment (06:18):

  • Endorses expanding higher education as both an unemployment policy and a means to raise workforce productivity.
  • Notes Sweden’s positive experience with such measures.

4. Fiscal Policy and Unemployment

• Budget Cuts vs. Targeted Intervention (07:21):

  • Pissarides does not favor across-the-board public spending cuts; recommends smaller, smarter budgets with targeted unemployment policies.
  • “You could get quite far in dealing with unemployment with very inexpensive policies... Not much more than what you would spend on unemployment insurance benefits, for example.”

• Structural Unemployment (08:20):

  • Argues there’s no intrinsic reason for higher structural unemployment post-crisis, provided periods of unemployment are kept short.

5. The Importance of Duration and Deregulation

• Preventing Long-Term Unemployment (09:00):

  • Stresses that keeping the duration of unemployment short is critical to prevent rises in structural unemployment.

• Labor Market Deregulation (13:04):

  • Supports moderate deregulation, balancing needed worker protections with labor market flexibility.
  • Critiques excessive regulation leading to inflexible or two-tier labor markets (e.g., as seen in Spain).

6. International Perspectives & Case Studies

• US Unemployment Puzzle (15:05):

  • Puzzled by the high US unemployment in the recent recession compared to previous patterns; suggests overcautious hiring due to uncertainty about external finance.

• Emerging Markets (24:07):

  • Advises growing economies to avoid introducing restrictive labor market benefits during growth periods, as these can become problematic when growth slows.

• Latin America and Subsidies (25:56):

  • Suggests targeting subsidies to give unemployed direct work experience, rather than only training programs.

7. Applying the Theory in Greece (29:17):**

• Recommends reforms to increase labor force participation, raise retirement ages, and ease job protection laws to help Greek labor markets.

Notable Quotes & Memorable Moments

• On the Framework’s Relevance:

  “The way we have really is that it gives you the framework to study the impact of policy on unemployment, and then it’s up to the policymakers…”
  — Christopher Pissarides (03:35)

• On Specific Policy:

  "You shouldn't allow the unemployed to remain unemployed for very long periods of time because they lose their skills, they lose the sort of mentality that is required to get another productive job."
  — Christopher Pissarides (05:22)

• On Budget Cuts:

  “I wouldn't be in favor of unconditional cuts in public spending in the labor market because that could have bad effects on unemployment.”
  — Christopher Pissarides (07:24)

• On Rising Unemployment in the US:

  “It’s a puzzle why unemployment has gone up by as much as it has in the United States... American companies rely a lot more on external finance than companies in Europe.”
  — Christopher Pissarides (15:10)

• On being recognized as Cypriot:

  “It was one of the things that made me happiest actually is that reaction there, the way they sort of embrace me as a Cypriot.”
  — Christopher Pissarides (31:16)

Important Timestamps

| Time | Segment | |------------|-----------------------------------------------------------------------------------------------------| | 00:28–02:00| Pissarides reflects on winning and explains the nature of the Nobel prize in economics | | 03:00–05:50| Discussion of developing policy frameworks, examples from recent recessions | | 06:18–06:52| Policies for youth and expanding higher education | | 07:21–08:20| On budget cuts, targeting unemployment, and avoiding structural unemployment | | 13:04–14:52| Labor market deregulation and its effect | | 15:05–17:04| Unemployment and productivity—US and international puzzles | | 24:07–25:41| Advice for emerging economies | | 25:56–28:08| Addressing Latin American unemployment and the value of targeted subsidies | | 29:17–31:16| Applying theory to Greece; emotional ties to Cyprus |

Tone and Atmosphere

The event is celebratory yet down-to-earth, with a mixture of academic rigor and personal anecdotes. Pissarides is humble, reflective, and clear, frequently emphasizing both the practical and theoretical importance of his work.

Conclusion

This episode offers a unique opportunity to hear Nobel laureate Christopher Pissarides discuss his influential work on unemployment, the evolution of economic policymaking, and the importance of combining theoretical frameworks with well-targeted, flexible policy. The conversation is rich in real-world applications, ranging from Europe to the Americas, and underscores the global impact of foundational economic research.