It’s hard to think of a more delightful and satisfying piece of news than word that the Nobel prize in economics has gone to Columbia University’s Edmund “Ned” Phelps. He and his wife Viviana are not only wonderful individuals, as we learned on several occasions in the past few years, but in a career spanning more than four decades, there are few economic puzzles to which Mr. Phelps has not turned his intellect. He earned the prize for his work on the particular problems lying at the intersection of monetary policy, inflation control, and employment, but for the past few years he has been speaking regularly about the importance of that quality, which almost defines the city where he and Viviana have made their home — “dynamism.”

He is almost like a great painter in the perceptiveness with which he sees things over which others gloss. In an interview not long ago with our A.L. Gordon, Mr. Phelps described New York’s proliferation of pizza parlors as “an economist’s model of competitive behavior.” His ability is to detect economics at work just about anywhere. Recently he has been turning his eye to capitalism, especially as head of Columbia’s Center on Capitalism and Society. He started down this road in the early 1990s at the same time Russia was throwing off communism. Aware that Russia was on the verge of choosing either European-style market socialism or American-style capitalism, Mr. Phelps realized that no one had undertaken serious study of capitalism in more than a generation.

So he began dusting off von Mises, Hayek, and Schumpeter and presenting them to modern economists. We have the sense that Hayek would have been thrilled; twice, in the years before his death, he told us, between his pinches of snuff, of the importance of understanding precisely the nature of the choice between socialism and capitalism. This is no doubt how Mr. Phelps latched onto the importance of “dynamism,” which can be defined loosely as the qualities in a country’s economic system that create work, allow talent to shine, and encourage creative problem solving. Mr. Phelps has recognized that America’s dynamism has been the key to its economic success, while many European countries have stalled for lack of it.

As the Web site of Mr. Phelps’ Columbia center puts it, he and his colleagues “are united in believing it is time for economics to go beyond the mainstream models of markets to a serious study of capitalism — to the questions about its dynamism and its stability and how capitalism compares in these respects with its rivals, corporatism and market socialism.” While averring that institutions matter — “Just piling on more Ph.D.s if you don’t have the right infrastructure” won’t lead to economic growth, he noted during a panel discussion at CUNY in 2005, as reported then by our Gary Shapiro — Mr. Phelps has also always acknowledged the human element in economics. He told Ms. Gordon he admired the work of the earlier generation of capitalist theorists because they “brought the visions of business people into models of the economy.”

It seems especially appropriate, then, that Mr. Phelps has been recognized for his own work to do just that. The Nobel committee cited his work in modifying earlier theories of money supply, inflation, and employment to account for the inflation expectations of employers and employees. Earlier models had appeared to justify loose money on the theory that a one-time jolt of inflation would spur employment. Mr. Phelps, however, developed a theory that factored in inflation expectations and concluded that those expectations could confound the old inflation-employment trade-off. This is important, as even today the bond market tends to think that low unemployment and high inflation have to go hand in hand. They don’t. By demonstrating that intangible expectations about the future can shape the economy, he gave macroeconomics a fuller picture of how the economy works in real life, and transformed central banking in the process.

That Mr. Phelps would win the Nobel was predicted to us — quietly but firmly — by Amity Shlaes after a dinner party a year or so ago at the Phelps’ home. We don’t agree with him on everything (he opposed the Bush tax cuts). But so much the better. He may not be a native New Yorker (he was born in Evanston, Ill.), but he has become a New Yorker to the quick. He attended public school at Hastings-on-Hudson before heading to Amherst, and has been at Columbia since 1971. He and his wife have held season tickets at the Metropolitan Opera since 1974. He enjoys the grilled cheese at Tom’s diner in Morningside Heights. His academic home is a department that Columbia has built up since a slump in the 1970s to become itself a leading light of intellectual dynamism that has produced four Nobel economists in the past decade, more than any other American university. It can’t be a coincidence that a New Yorker would be one of the most enthusiastic scholars of dynamism in economics.