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Northwestern University

Dale Mortensen's Nobel Prize

"Instant" Recognition for a Lifetime of Labor Market Insights

Imagine. The most important phone call of your life is coming in and your cell phone isn’t working. Dale Mortensen was having lunch with colleagues in Denmark, where he is a half-time visiting professor at Aarhus University. Luckily for him, the call from Stockholm, informing him of his 2010 Nobel Prize in Economic Sciences, was transferred to a colleague’s cell and Mortensen was able to receive the monumental news within minutes. Like everything else in his life since then—dinner with royalty and being featured in a Nobel video, for instance—he seems to have taken the news in stride.

Mortensen, a pioneer in the theory of job search and search unemployment, is the Ida C. Cook Professor of Economics at Northwestern, where he has taught the entire 45 years of his career. He shares the prize with Peter Diamond, Massachusetts Institute of Technology, and Christopher Pissarides, London School of Economics and Political Science in the United Kingdom. The three developed a framework which seeks to explain why there are so many people unemployed at the same time as there are a large number of job openings. They share a prize of $1.5 million.

Mortensen’s graduate students and colleagues say the honor couldn’t happen to a nicer, more down-to-earth guy, albeit one with an “amazing mind.” As he recently sat down with Crosscurrents in his office in Leverone Hall, the truth of that description became apparent. The economist is dressed in jeans and a striped shirt and he laughs a lot, often at his own expense. In his deep baritone, he patiently explains the intricacies of his work to a lay person, for what must have seemed like the 100th time that week. The most dominant feature of his office these days is a huge photo of his extended family, greeting him at the airport upon his arrival home from Denmark. Happy young faces of his grown children and grandchildren compete for space in the photo with lots of purple and white Northwestern balloons. As he names each person in the picture, detailing their accomplishments, it’s evident that he is as proud of his family as he is of his prize. Here is an edited version of our interview, which took place just a month before the presentation of his Nobel in Stockholm in December.

How does it feel to have the recognition come at this stage of your career, as you are about to retire?

It’s appropriate timing, in that sense. The work was done a long time ago, but that’s typical of economics. I still work in the area. I’ve known I was on the [Nobel] list for five years, so it’s not a complete surprise. But the chance of this happening in any given year is not that big, nor is the chance of this happening at all!

How has winning the Nobel Prize changed your life so far?

In the long run, I hope it won’t very much. In the short run, it’s a full-time job.

I notice you have a scheduler you didn’t have before.

No, I never had anything like that. But last week, Sue Triforo, a close family friend and an excellent administrator, put in 60 to 80 hours. All the forms for Stockholm had to be typed—can you imagine, in this day and age? We needed a form for every person because our whole family is going, sixteen in all. It’s white tie for two events and we had to include sizes for renting formal attire, from the little guy there in the picture, who at 10 is the youngest of the group, to two others who are 13, as well as my son, son-in-law, and myself.

After the Monday reception at Northwestern, my wife and I immediately left for Copenhagen because there was an event the Queen was sponsoring. It wasn’t for my Nobel, but for all the presidents of the universities and government officials. But I did sit next to the Queen, Margrethe II. Her other dinner partner was the Prime Minister.

Did you have to learn how to address the Queen?

I was told it was “Your Majesty.” I don’t know that I used the term. We talked about her children and grandchildren and mine. She’s about the same age as I am. We talked about where my father was from. He was born in Denmark.

What were your parents’ professions?

My father was 10 when his parents emigrated here. They lived in northern Minnesota in one of those little villages where everyone was Danish. He became a graduate forester at the University of Minnesota and moved to where the forest was at the time, so I grew up in Oregon. My mother had a year of university education.

Would those who knew you growing up in Oregon be surprised at your winning a Nobel?

I’ve heard from several of them and they are not terribly surprised. I was a good student but well-rounded. I was an athlete and student leader, president of my senior class in both high school and college. I played football, defensive tackle in high school, but I wasn’t very good.

How did you meet your wife?

Beverly is a musician. We met in Pittsburgh in grad school [at Carnegie Mellon] and she got me interested in a madrigal singing group. She composes music and was choir director at St. Athanasius church in Evanston for 25 years; I was in her choir the entire time. She also received her PhD here at Northwestern in religious studies and teaches two undergraduate courses a year.

There has been so much written about your work in recent weeks. Do you think the press has accurately described it? For example, the Chicago Tribune stated that your work “focused on labor market inefficiencies that make it difficult for workers to match up with job openings.”

All these reports are like the stories about the proverbial elephant: they report on the tail or the ear but the animal is bigger than that.

How would you describe your work to a lay audience in a fuller way?

We developed a structure that is a richer way to view what was going on in the labor market than had been done before. The commodity exchange is a good example of supply and demand and its intersection. You’ve got buyers and sellers on both sides of the market in the same place. When we began our work, that model was commonly applied to all markets. But it was pretty obvious, as I became a student of labor economics, that the labor market is much more complicated and much more dynamic than that. Jobs are more like a relationship, like a marriage, in which both sides have to know whether it’s a good fit. And so our framework developed that point, in such a way that one could use the framework to look at data and test it.

How does that apply to unemployment, a subject on everyone’s mind lately?

Unemployment isn’t just a set of people who are sitting somewhere. They are people who are losing their jobs, while others are finding new jobs all the time. It’s a state. In normal times, the typical person doesn’t spend too much time in that state of unemployment, just a few weeks. So our framework focused on these durations. How long does it take to find a job? And what’s the distribution of durations? Those are quantities that are measurable, that we can manipulate into theory and talk about. What now are the determinants of that distribution of unemployment, in a scientific way? It has to do with a demand side and a supply side, of course. In the commodities exchange, you are looking at what quantities are traded at what price. And we assume, using that model, that those quantities and prices are equating supply and demand. But in the labor market, you can’t make that assumption. The kind of data you are looking at is much richer. You are looking at how long does it take to find a job, how long do jobs last?

What are all the factors you are looking at?

There are a host of factors but the issues that get emphasized are the ones that affect the incentives of workers to find jobs and the incentives of employers to create new jobs. Both of those are extremely important in determining how long it takes to find a job and how long jobs last. How good the matches are also affects how long jobs last.

If you could, how would you change policy to improve the current job market?

The problem right now, as I see it, is uncertainty about the future, on the employers’ side. There are a lot of elements to that uncertainty. Everyone is trying to figure out when the next real upturn will be, and they are not making a move until it comes. That means it’s not going to happen right away. There are some small things that presumably would improve that. One would be tax credits for job creation, a proposal that’s been around at least since the Carter administration. Also, Congress needs to reduce the uncertainty of what the new health care program is going to look like and what the tax increase is going to be, and there’s no doubt going to be a tax increase. We need to allow taxes to go up, then more directly provide incentives for job creation. So those are the ways, none of which I would expect to change the situation overnight.

You’ve been teacher and mentor to countless undergraduate and graduate students, many of whom have gone on to teach at prestigious universities, and work at the Bureau of Labor Statistics, the World Bank, and the International Monetary Fund. How have they applied your work to solve problems?

One was using the structure to look at how to design unemployment insurance. There’s an obvious social and private benefit to the insurance—it’s income support for those who lose their jobs and for many of them, it’s through no fault of their own. But every insurance system has a moral hazard problem on the other side of it: having that cushion means that getting a job is not as urgent as it would be, so perhaps the worker spends a little less effort.

You’ve been on the Northwestern faculty since 1965. Obviously, it’s been a good job match. How have your students changed over time?

I think they’ve improved in terms of their basic abilities. The quantitative [test] scores tell you that. They are just more confident, probably smarter.

How do you intend to spend your well-earned retirement?

“Retirement” is to be put in quotes. Old professors are like old soldiers. I am trying to find a little more time to spend with these kids [pointing to the large photo]. The oldest is applying for college and one of the places she’s looking at is Northwestern. But I’ve got three or four research projects going on, mostly with co-authors, and at the moment, they’re carrying the ball.

I’m of two minds about giving up working with PhD students. I’ve got a lot of them now and that takes a lot of time. If I stop teaching, they are not going to be knocking on my door. But the PhD students give as much as they take and these have been very interesting and rewarding personal relationships.

Is there anything else you’d like to tell the Northwestern community?

Only that it’s been a good run. I’ve certainly enjoyed the College and the University over the years.

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