Krugman offers congratulations:
My former colleague Peter Diamond, along with Dale Mortenson and Chris Pissarides, has won the Nobel. Richly deserved. The prize is for work on frictions in markets, which is very important stuff; but Peter, an incredibly profound thinker, has done much much more.
But it seems to me that this prize goes against Krugman's thinking on the current labor market problems that can be solved with an increase in aggregate demand. From the NYT article:
The work is considered by many researchers to be particularly timely in today’s economic climate, in which many developed countries like the United States are facing stubbornly high unemployment rates. For example, the theory developed by the three economists has been used to try to design alternative unemployment benefit systems, and to determine how hiring and firing costs affect the unemployment rate.
More on-topic, Krugman's link to Peter Diamond's Google Scholar search comes up with his CVM paper in the Journal of Economic Perspectives at #2 with over 1000 citations. Wow.
Tim has already posted one of the money quotes from that paper (which turned out to be misguided; e.g.,see this paper). Diamond's work in environmental economics -- the Exxon funded critique of the contingent valuation method -- should be applauded for focusing researcher effort on the CVM and partially leading to work on choice experiments in environmental econ. But, I hope that folks don't view the CVM critique as Nobel Prize level work (or elevate the critique to that level, ex-post).
*Along with McFadden and Kahnemann.