Fixing bank runs (sort of) wins the Nobel prize
Edward Price is principal at Ergo Consulting. A former British trade official, he also teaches at New York University’s Center for Global Affairs.
How fascinating it is that Bernanke, Diamond and Dybvig won Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel — and how super fascinating that they won it together.
There’s good reason of course. Diamond and Dybvig’s 1983 paper was the first real model of its kind. Its explanation of sunspot bank runs is genius. Diamond and Dybvig are geniuses. Meanwhile Ben Bernanke (plus Mervyn King, US Treasury officials and, frankly, Vishnu the Preserver) saved the financial system. After 2008, we avoided another Great Depression. In the immortal words of Gordon Brown, they saved the world . . . the world’s banking system. They deserve their prize.
This story originally appeared on: Financial Times - Author:Edward Price
