When writing about the most prestigious prize in economics, it is worth pointing out that this is a Nobel somewhat different from the other prizes. This is because Alfred Nobel did not envisage honouring economists in his will. The official name is the 'Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel'.
It was awarded in 2022 to three economists for their research on banks and financial crises. The laureates were Ben S. Bernanke, Douglas W. Diamond and Philip H. Dybvig. In justifying its decision, the Swedish Academy of Sciences wrote that the contribution of the winners' research lies in explaining why it is so important to avoid banking crises. All three have measurably increased our knowledge of the role of banks in the economy, especially during financial crises.
The best known of this year's Nobel Prize winners is undoubtedly Bernanke (The Brookings Institution), head of the US central bank, the Fed - the Federal Reserve - from 2006 to 2014. He was the successor to the famous Alan Greespan. Bernanke's research interests revolve around the Great Depression of the late 1920s and early 1930s. In his speech on the occasion of the 90th birthday of the late another Nobel laureate in economics (from 1976), Milton Friedman, Bernanke acknowledged him and Anna Szwartz on the impact of the Federal Reserve's misguided decisions in causing the Great Depression. He said at the time: Regarding the Great Depression, you're right. We did it. We're very sorry. But thanks to you, we won't do it again. He apologised as Head of the Fed for the historical mistakes of the institution he represented, and at the same time thanked them for their monetary theory, which was used by the Fed in the implementation of monetary policy during the global financial crisis of 2007-2008. Bernanke's contribution to modern economics includes, among other things, an analysis of the social function of banks as an intermediary between savers and borrowers to verify the reliability of the latter, which serves to protect the interests of the former. This boils down to ensuring the transformation of savings into good rather than bad investments.
Diamond (University of Chicago) and Dybvig (Washington University in St. Louis) investigate the relationship between savings and investment. The level of savings determines the level of investment, but there is some conflict of interest between savings owners and business and mortgage holders financing their investments with loans. Savers expect a certain liquidity of accumulated and deposited capital in the financial market, i.e. accessibility to it in case of unexpected events. Again, businesses and mortgage holders need certainty that they will not have to repay their loans prematurely. Between these two parties are the banks and both Nobel Prize winners propose an optimal solution to this conflicting situation. Diamond's and Dyvbing's research also explained how a rumour of impending bank failure becomes a self-fulfilling prophecy, and pointed out what government regulatory actions can mitigate such risks.
Heads the Department of Forecasting and Quantitative Analysis at the Institute of Management, where he serves as Deputy Director for Science.