Former Fed chair Ben Bernanke shares Nobel prize in economics for crisis research
Former Federal Reserve Chair Ben S. Bernanke and two US-based colleagues won the 2022 Nobel Prize in Economics for their research into banking and financial crises.
Prof Douglas Diamond, Prof Philip Dybvig and the one-time central banker will share the 10-million-kronor (S$1.27 million) award, the Royal Swedish Academy of Sciences announced in Stockholm on Monday.
The winners “have significantly improved our understanding of the role of banks in the economy, particularly during financial crises, as well as how to regulate financial markets,” said the official Twitter feed of the Nobel Prize. Their research “reduces the risk of financial crises developing into long-term depressions with severe consequences for society”, it added.
By honoring Dr Bernanke, the prize committee have taken an unusual step of adding an actual practitioner of economics policy to their pantheon. By contrast, many prior winners have stayed firmly rooted in academia.
That is illustrated by the widespread list of research areas celebrated in the past decade. They range from the integration of climate change and technological innovations into economics in 2018, to studies involving global poverty and auction theory in successive years.
Prof Diamond and Prof Dybvig were lauded for their research identifying the vulnerability of banks to rumours of collapse, and how governments can prevent that.
Dr Bernanke’s studies meanwhile analyzed the Great Depression, and how bank runs ensured that crisis became so extended.
Dr Bernanke is now at the Brookings in Washington. Prof Diamond is at the University of Chicago, while Prof Dybvig is at the Washington University in St Louis, Missouri.
Prof Diamond, said, as with most such winners, the news had taken him by surprise while sleeping. He went on to explain what his research showed about financial turmoil and how to avoid it.
Crises happen “when people start to lose faith in the stability of the system”, he said. “Be prepared for making sure that your part of the banking sector is both perceived to be healthy and to stay healthy, and to respond in a measured and transparent way to changes in monetary policy.”
The prize in economic sciences was established by Sweden’s central bank in 1968, adding another category to existing ones lauding achievements in physics, chemistry, medicine, peace and literature.
Those were created in the will of Alfred Nobel, the Swedish inventor of dynamite, who died in 1896.
Once again, all winners of the economics prize were male. It has been awarded to women only twice, while 87 men have previously been honored.
Among Nobel winners in all categories this year, women remained in the minority. Prof Carolyn R. Bertozzi shared the award for chemistry, while the one for literature went to Annie Ernauz.
The award is formally known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. Among the most well-known 20th-century recipients are Milton Friedman, James Tobin, Paul Krugman and Friedrich August von Hayek.