Jan 10, 2014
Dale Mortensen: “We were lucky to have him here and we’ll always remember him”
Dale Mortensen, a longtime professor of economics at Northwestern University, passed away yesterday at the age of 74. Mortensen was a winner of the 2010 Nobel Prize in economics for his research on labor markets.
One longstanding problem in economics, explains Sergio Rebelo, a professor of finance at the Kellogg School, is how markets arrive at a price that equates supply with demand. In the context of labor markets, the question becomes, how do employers and employees arrive at a wage that is amenable to both of them?
But although most models of the economy are frictionless—assuming, for instance, instantaneous matches between jobs and job seekers—the real world doesn’t work that way. Even in an extremely well functioning labor market, there is always unemployment, with people actively looking for new jobs at the same time as employers actively search to fill vacancies.
Mortensen was not scared off by this messy reality. “He gave a really good account of how wages are determined in an equilibrium,” says Rebelo. “He modeled the incentives of firms to post vacancies, the incentives of workers to look for jobs, and also the incentives of workers to quit jobs. He devoted a lot of his life to these problems of markets that are much more complicated than the idealized markets that Adam Smith and a lot of the classical economists worked on.”
“Dale was a huge contributor in helping us all understand how labor markets work,” Thomas Hubbard, a professor of management and strategy and a senior associate dean of strategic initiatives at the Kellogg School, concurs. “By introducing search costs into the existing economic framework, his models led to key insights into the roots of unemployment and how it contributes to and reflects the ups and downs of the business cycle.”
In addition to being an accomplished scholar, Mortensen was a beloved colleague and mentor to the broader economics community at Northwestern University—including students and faculty at the Kellogg School, where he also held an appointment in managerial economics and decision sciences. “The joke about him is that even though he worked on why people changed jobs, he himself never changed jobs,” says Rebelo. “The fact that he was so accomplished and was here for such an extended period of time made him a pillar of the department.” He continues: “We were lucky to have him here and we’ll always remember him.”
Editor's Note: Photo courtesy of FishinWater at Wikimedia.
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