Wikipedia

Peter Diamond

For other uses, seePeter Diamond (disambiguation).

Peter Arthur Diamond(bornApril 29,1940) is an Americaneconomistknown for his analysis ofU.S. Social Securitypolicy and his work as an advisor to the Advisory Council on Social Security in the late 1980s and 1990s. He was awarded theNobel Memorial Prize in Economic Sciencesin 2010, along withDale T. MortensenandChristopher A. Pissarides.He is anInstitute Professorat theMassachusetts Institute of Technology.On June 6, 2011, he withdrew his nomination to serve on theFederal Reserve's board of governors, citing intractableRepublicanopposition for 14 months.[8][9]

Peter Diamond
Diamond in 2010
Born
Peter Arthur Diamond

(1940-04-29)April 29, 1940(age 84)
New York City,New York,U.S.
EducationYale University(BA)
Massachusetts Institute of Technology(MA,PhD)
SpouseKate Myrick
Academic career
FieldPolitical economics
Welfare economics
Behavioral economics
InstitutionsMassachusetts Institute of Technology
University of California, Berkeley
University of Cambridge
Doctoral
advisor		Robert Solow[1]
Doctoral
students		Martin Hellwig[2]
David K. Levine[3]
Andrei Shleifer[4]
Emmanuel Saez[5]
Botond Kőszegi[6]
AwardsNemmers Prize in Economics(1994)
Nobel Memorial Prize in Economic Sciences(2010)
InformationatIDEAS / RePEc
Academic background
ThesisEssays on optimal economic growth(1963)
Notes

Early life and education

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Peter Diamond,Dale T. Mortensen,Christopher A. Pissarides,Konstantin Novoselov,Andre Geim,Akira Suzuki,Ei-ichi Negishi,andRichard Heck,Nobel Prize Laureates 2010, at a press conference at theRoyal Swedish Academy of Sciencesin Stockholm.

Diamond was born to aJewishfamily inNew York City.[10][11][12]His grandparents immigrated to the U.S. at the turn of the 20th century. His mother's parents and six older siblings came from Poland. His father's parents met in New York, she came from Russia and he came from Romania. His parents, both born in 1908, grew up inNew York Cityand never lived outside the metropolitan area. Both finished high school and went to work, his father studying atBrooklyn Law Schoolat night while selling shoes during the day. They married in 1929. He has one brother, Richard, born in 1934.[13]

He started public school in the Bronx, and switched to suburban public schools in the second grade when the family moved toWoodmere,onLong Island.He eventually graduated fromLawrence High School.[14]He earned abachelor's degreesumma cum laudeinmathematicsfromYale University(1960), and aPh.D.at theMassachusetts Institute of Technology(1963).[15]

Career

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He was anassistant professorat theUniversity of California, Berkeley,from 1963 to 1965 and an actingassociate professorthere before joining theMIT facultyas an associate professor in 1966.[15]Diamond was promoted tofull professorin 1970, served as head of the Department of Economics in 1985–86 and was named anInstitute Professorin 1997.[15]

In 1968, Diamond was elected a fellow and served as president of theEconometric Society.[15]In 2003, he served as president of theAmerican Economic Association.[15]He is a Fellow of theAmerican Academy of Arts and Sciences(1978), a member of theNational Academy of Sciences(1984), and is a founding member of the National Academy of Social Insurance (1988).[15]Diamond was the 2008 recipient of the Robert M. Ball Award for Outstanding Achievements in Social Insurance, awarded by NASI.[15][16]As aFulbright Distinguished Chair,in 2000 he taught economics at theUniversity of Siena.

Diamond wrote a book on Social Security withPeter R. Orszag,President Obama's former director of theOffice of Management and Budget,[17]titledSaving Social security: a balanced approach(2004,-5,Brookings Institution Press).[18]An earlier paper fromBrookings Institutionintroduced their ideas.[19]

In April 2010, Diamond, along withJanet YellenandSarah Bloom Raskin,was nominated byPresidentBarack Obamato fill the vacancies on theFederal Reserve Board.[20]In August 2010, the Senate returned Diamond's nomination to the White House, effectively rejecting his nomination.[21]President Obama renominated him in September.[22]In June 2011, following a third round of consideration for the Fed seat, Diamond wrote in aNew York Timesop-edcolumn that he planned to withdraw his name. In the column, he strongly criticized the nomination process and "partisan polarization" inWashington,saying he was effectively blocked by Republicans on theSenate Banking Committee.He also detailed the consideration process, saying that in the first and second rounds, three Republicans had favored his confirmation. In the third, when his name was resubmitted in January 2011, the Republicans all followed ranking minority member Shelby (R,Alabama) in voting against it. Diamond continued, quoting Shelby:

"Does Dr. Diamond have any experience in conducting monetary policy? No," [Shelby] said in March. "His academic work has been on pensions and labor market theory." But [Diamond began his reply, in the column] understanding the labor market—and the process by which workers and jobs come together and separate—is critical to devising an effective monetary policy.

Diamond went on to discuss how his expertise would, he felt, have benefited the central bank and his opinion that "[s]killed analytical thinking should not be drowned out by mistaken, ideologically driven views."[23]In a statement, Shelby "wouldn't be drawn into a public spat with the nominee," saying simply "I have said many times that I commend Dr. Diamond's talent and career. I wish him the best in the future."[24]

Ben Bernanke(Nobel Prizewinner and formerchairman of the Fed) was once a student of Diamond.[25]

In October 2010, Diamond was awarded theNobel Prize in Economic Sciences,along withDale T. MortensenfromNorthwestern UniversityandChristopher A. Pissaridesfrom theLondon School of Economics"for their analysis of markets with search frictions".[26]

In 2011 he received The John R. Commons Award fromOmicron Delta Epsilon,the economics honor society.[27]

Andrei ShleiferandEmmanuel Saezare two of his doctoral supervisees who won the John Bates Clark Medal for the best American economist under the age of 40.

Diamond has been married to Kate (Priscilla Myrick) since 1966.[28]They have two sons.

Professional activity

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Diamond has made fundamental contributions to a variety of areas, includinggovernment debtandcapital accumulation,capital marketsand risk sharing,optimal taxation,search and matching inlabor markets,andsocial insurance.[citation needed]

Dynamic inefficiency

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Further information:Overlapping generations model

Diamond (1965) extended theRamsey–Cass–Koopmans model,from a representative infinitely-livedagentto a setup where new individuals are continually being born and old individuals are continually dying. He built on a framework developed byPaul Samuelson,who had termed it "an exact consumption-loan model."[29]

Since individuals born at different times attain different utility levels, it is not clear how to evaluatesocial welfare.One of the main results of this paper is that the decentralized equilibrium might not be dynamicallyPareto efficient,even though markets are competitive and externalities are absent. In particular, depending on the preferences and technology, the economy might find itself saving too much, pushing the capital stock above what Edmund Phelps called theGolden Rulelevel. In this situation, government debt can crowd out capital and, in doing so, increase welfare.

Diamond–Mirrlees production efficiency result

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TheDiamond–Mirrlees production efficiency result[30]follows from a set of assumptions which characterise what can be called a 'DM world'.

It is characterised by 7 assumptions: i) perfect competition ii) constant returns to scale to production iii) lump sum taxation is not possible iv) there is a revenue requirement i.e. the government has to raise revenue to fund its expenditures v) full instrument set: the government has the flexibility to levy taxes on all commodities and all factors of production in the economy vi) non-satiation in at least one good vii) individualistic social welfare function.

Under these assumptions, it can be shown that the second best allocation requiresproduction efficiencyto be preserved throughout the economy. This result arises from the assumptions that characterise the DM world:

  • The production side of the economy is independent from the consumption side of the economy (assumption i and ii): perfect competition and constant returns to scale implies no profits (if not producers would increase production infinitely and thus profits). This means that the income of consumers do not depend on the producer prices. In addition, this also means that the incidence of the tax would fall 100% on consumers. Again, this is an application of thetheory of the second best:Pareto efficiency should be restored in independent markets.
  • The economy is not able to operate in a first-best world (assumption iii and iv): the government must raise revenue but is not able to raise this through lump sum taxation, thus a Pareto optimal allocation of resources is not possible. Note, this is the only irremovable distortion in the DM world.
  • The government has a full instrument set that allows any configuration of prices to be achieved, which allows the government to bring about any configuration of relative consumer prices that is consistent with the revenue requirement.

The key idea is that when the government can control all consumer prices, the producer prices are independent from the consumer prices and the consumption decision part of the optimal taxation problem becomes independent of the production decision.[31]The implication of the result is that there should be no taxes on intermediate goods and imports. Another implication is that public and private sector production should be based on the same relative prices. In practice, one needs to consider if the assumptions of the DM world are likely to apply; nevertheless, the efficiency result is a useful benchmark against which to judge whether any policy violation of production efficiency is justified.

Labor market search and match

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Further information:Diamond coconut model

Diamond (1982) is one of the first papers which explicitly models thesearch processinvolved in making trades and hiring workers, which results in equilibrium unemployment.

Social Security policy

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Diamond has focused much of his professional career on the analysis of U.S.Social Securitypolicy as well as its analogs in other countries, such as China. In numerous journal articles and books, he has presented analyses of social welfare programs in general and the American Social Security Administration in particular. He has frequently proposed policy adjustments, such as incremental but small increases in social security contributions usingactuarialtables to adjust for changes inlife expectancyand an increase in the proportion of earnings that are subject to taxation.

See also

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References

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  1. ^Peter A. Diamond - Autobiography - Nobelprize.org,PDF page 2.
  2. ^Hellwig, Martin Friedrich (1973).Sequential models in economic dynamics(Ph.D.).MIT.hdl:1721.1/13930.
  3. ^Levine, David Knudsen (1981).The enforcement of collusion in oligopoly(Ph.D.).MIT.RetrievedFebruary 8,2017.
  4. ^Shleifer, Andrei (1986).The business cycle and the stock market(PDF)(Ph.D.).MIT.RetrievedMay 21,2017.
  5. ^Saez, Emmanuel (1999).Essays on the economics of income taxation(Ph.D.).MIT.hdl:1721.1/38434.
  6. ^Kőszegi, Botond (June 8, 2000),Essays in Behavioral Economics(Thesis),MIT(published 2000),hdl:1721.1/74883
  7. ^"Peter Arthur Diamond"(fee, viaFairfax County Public Library).Biography in Context.Detroit:GaleBiography In Context. 2010. Gale Document Number: GALE|K1650007280.RetrievedJune 13,2011.
  8. ^Nobel Laureate Diamond Withdraws Nomination to Fed Board,Joshua Zumbrun,Bloomberg News,June 6, 2011.
  9. ^"Trump science job nominees missing advanced science degrees".Star-Advertiser.Honolulu. Associated Press. December 5, 2017.RetrievedDecember 5,2017.
  10. ^Jewish Virtual Library:"Peter Diamond" retrieved January 11, 2014.
  11. ^"Home | MIT Hillel"(PDF).
  12. ^"Going to the head of the class".
  13. ^Autobiography,Nobel Prize Official Site.
  14. ^"Peter A. Diamond PhD '63".MIT.RetrievedSeptember 13,2022.
  15. ^abcdefgMIT Curriculum VitaeArchivedJune 13, 2010, at theWayback Machine
  16. ^"National Academy of Social Insurance – Conferences & Events".Archived fromthe originalon September 28, 2008.RetrievedMay 30,2008.
  17. ^Chan, Sewell,"White House Identifies 3 as Likely Picks for Fed Posts",The New York Times,March 12,2010,2:30 pm.Retrieved March 12, 2010.
  18. ^Book overviewGoogle Bookslisting. Retrieved March 12, 2010.
  19. ^"Saving Social Security: The Diamond-Orszag Plan"ArchivedMay 19, 2011, at theWayback Machineby Peter A. Diamond and Peter R. Orszag, Apr. 2005, Brookings Web site.PDFdownload of paper available. Retrieved March 12, 2010.
  20. ^Reddy, Sudeep (April 29, 2010),"Obama Nominates Yellen, Raskin, Diamond to Fed Board",Wall Street Journal
  21. ^"Senate rejects Fed nominee Diamond before voting".Reuters.August 6, 2010.
  22. ^Chan, Sewell,"Two Are Confirmed for Fed's Board",The New York Times,September 30,2010 (also on p. B3 NY ed.). Retrieved October 11, 2010.
  23. ^Diamond, Peter A.,"When a Nobel Prize Isn't Enough",The New York Times,June 5, 2011. Retrieved June 6, 2011.
  24. ^Robb, Greg,"Diamond exits fight for Fed board seat",MarketWatch,June 6, 2011, 11:55 a.m. EDT. Retrieved May 7, 2011.
  25. ^Chan, Sewell (August 6, 2010)."Senate Says Economist Lacks Experience to Serve Fed".The New York Times.
  26. ^The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2010 Peter A. Diamond, Dale T. Mortensen, Christopher A. Pissarides,official web site.
  27. ^"Omicron Delta Epsilon - the International Economics Honor Society".
  28. ^"Peter A. Diamond - Biographical".Archived fromthe originalon October 14, 2010.
  29. ^Samuelson, Paul A. (1958). "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money".Journal of Political Economy.66(6): 467–482.doi:10.1086/258100.JSTOR1826989.S2CID153586213.
  30. ^Diamond, Peter A.; Mirrlees, James A. (1971). "Optimal Taxation and Public Production I: Production Efficiency".The American Economic Review.61(1): 8–27.JSTOR1910538.
  31. ^Naito, Hisahiro (January 25, 2004). "Redistribution, Production Inefficiency and Decentralized Efficiency".SSRN492882.
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Academic offices
Preceded by Presidentof theAmerican Economic Association
2003–2004 		Succeeded by
Awards
Preceded by Laureate of the Nobel Memorial Prize in Economics
2010
Served alongside:Dale T. Mortensen,Christopher A. Pissarides 		Succeeded by
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