A US trio won the Nobel Prize in Economics on Monday for research into the role of banking in the economy, particularly the importance of avoiding collapse during financial crises.
Former Federal Reserve Chairman Ben Bernanke was honored along with Douglas Diamond and Philip Dybvig for “significantly improving our understanding of the role of banks in the economy, particularly during financial crises, and of the regulation of financial markets”. , according to the jury.
“Their analyzes have been of great practical importance in regulating financial markets and managing financial crises,” she added.
Bernanke, 68, who chaired the US Federal Reserve from 2006 to 2014, was credited for his analysis of “the worst economic crisis in modern history” – the Great Depression of the 1930s.
Diamond, a professor at the University of Chicago, born in 1953, and Dybvig, 67, a professor at Washington University in St. Louis, were honored for showing how “banks provide an optimal solution” to convert savings into investments by acting as an intermediary.
The pair also showed how vulnerable these institutions were to so-called bank runs.
“If many savers rush to the bank to withdraw their money at the same time, the rumor could become a self-fulfilling prophecy – a bank run ensues and the bank collapses,” the Nobel Committee said.
The committee added that this dangerous dynamic can be avoided by governments offering deposit insurance and giving banks a lifeline by becoming lenders of last resort.
“The award winners’ insights have improved our ability to avoid both severe crises and expensive bailouts,” said Tore Ellingsen, Chair of the Economics Award Committee.
“In short, the theory is that banks can be enormously useful, but are only guaranteed to be stable if properly regulated,” he added.
Of all the Nobel Prizes, the Business Prize has the fewest female laureates, with only two since it was first awarded in 1969 – Elinor Ostrom in 2009 and Esther Duflo in 2019.
– ‘False Nobel’ –
Created by Sweden’s central bank, the business prize was the only award missing from the original five created by scientist Alfred Nobel, earning him the nickname “fake Nobel”.
But like the other prizes, it comes with a medal and a prize money of 10 million Swedish kronor (around US$900,000).
The winners receive the award from King Carl XVI. Gustaf at a ceremony in Stockholm on December 10, the anniversary of the death of scientist Alfred Nobel in 1896, who created the awards in his last will and testament.
Last year’s award went jointly to Canadian David Card, Israeli-American Joshua Angrist, and Dutch-American Guido Imbens for research that has “revolutionized” empirical work in their field and brought a better understanding of how labor markets work.
The business award also caps this year’s Nobel season, which saw Friday’s presentation of the Peace Prize to Russian rights group Memorial, the Ukrainian Center for Civil Liberties, which documents “Russia’s war crimes” against the Ukrainian people, and imprisoned activist Ales Bialiatski of Belarus.
On Thursday, the literature tip went to the French author Annie Ernaux.
The Medicine Prize opened the season and went to Swedish paleogeneticist Svante Paabo, who discovered Neanderthal DNA and the previously unknown Denisovan.
The physics prize then honored Alain Aspect from France, Anton Zeilinger from Austria and John Clauser from the United States for their discoveries in the field of quantum entanglement.
Another trio, Carolyn Bertozzi and Barry Sharpless from the United States, along with Morten Meldal from Denmark, won the chemistry prize for their work on what is known as click chemistry.
