“I know you worry about the deficit but I think you worry about it too much. Keynesianism of the kind that guided policy after the Second World War no longer works, but there are still lessons in it for us. Worrying too much about the deficit in a recession makes the recession worse…Let me emphasize that we do need a plan for deficit reduction. But it does not have to start so soon—when the economy is still in recession—go so deep and be so inflexible.
Your approach to deficit reduction reminds me of Margaret Thatcher’s approach to reducing inflation. She was right to be worried about it, and the reforms that she introduced were badly needed. But she squeezed the economy so much, in such a short period of time, that she caused a severe—and unnecessary—recession. It took almost ten years for unemployment to recover. I fear that the way you are squeezing the economy now will have similar consequences. It will slow down the recovery and may even cause a double-dip recession.”
From his letter to the Chancellor of the Exchequer, 2011
Christopher A. Pissarides was born in 1948 in Nicosia, Cyprus, but he is known as a British-Cypriot economist. He chose to study economics because “….like many well-off Cypriots, I went to London to study for a degree in economics. I wanted to study architecture, but because of my father’s business my parents persuaded me to try economics or accounting. My love at school was mathematics, but it was not considered to be a good profession for a young man, with which I agreed. When I tried economics I liked it, so I decided to pursue my studies in it.”
Studying in England, he earned his bachelor’s (1970) and master’s (1971) degrees in economics from the University of Essex. He continued his studies in England and received his Ph.D. (1973) from London School of Economics. Upon graduation he went to Cyprus and served in the Economic Research Department of the Central Bank of Cyprus for a year. Then, he went back to England and began working as a lecturer at University of Southampton, and then at the LSE, a position which he has held ever since.
Pissarides has spent most of his career studying the economics of unemployment. His most famous paper, ‘Job Creation and Job Destruction in the Theory of Unemployment’, was the beginning of his cooperation with Dale T. Mortensen. Together, they introduced the Mortensen-Pissarides model.
In 2010, Christopher Pissarides shared the Nobel Prize in Economics with Peter A. Diamond and Dale Mortensen for their analysis of markets with search frictions. According to the Nobel Committee, “…the Laureates’ models help us understand the ways in which unemployment, job vacancies, and wages are affected by regulation and economic policy. This may refer to benefit levels in unemployment insurance or rules in regard to hiring and firing. One conclusion is that more generous unemployment benefits give rise to higher unemployment and longer search times.”