(NECN: Greg Wayland, Cambridge, Mass.) - Massachusetts Institute of Technology professor Peter Diamond has received a huge honor. He is one of three winners of the 2010 Nobel economics prize.
The 70-year-old economist has entered many M.I.T. classrooms, but rarely to applause, but Monday morning was an exception as his Nobel Prize was announced. Peter Diamond is popular here and, for four decades, has taught at the school where he himself graduated in 1963.
He shares Nobel honors with colleagues Dale Mortensen of Northwestern and Christopher Pissarides of the London School of Economics.
A colleague broke the news to him via cell phone Sunday night as his son was driving him home from the airport after a trip abroad.
Diamond: "Fortunately, I was sitting down and I wasn't behind the steering wheel, and it kind of takes your breath away...."
He has studied how consumer and labor markets function --developing a theory that helps explain why many people can remain unemployed despite a large number of job vacancies.
"And obviously in the labor market, it takes time for workers to find suitable jobs, it takes time for employers to find suitable workers and that dynamic has a feedback into how wages are determined, how efficient the economy is. "
Along with former Office of Management and Budget director Peter Orszag, he proposed that Social Security could be saved through payroll tax increases and benefit reductions.
"When the system is out of balance as it is now, there's no way of restoring it to long-run balance that doesn't include painful ingredients. "
Current Federal Reserve Chairman Ben Bernake is one of his former students.
But President Obama's nomination of Diamond to join the Fed is opposed by Senate Republicans who feel he lacks experience with the national economy.
Does he plan to withdraw his application?
"No, I do not," he answered curtly, and afterward told me he has every hope of being appointed a Federal Reserve Governor.