The 2022 Nobel Prize in Economic Sciences was won by Ben S. Bernanke, Douglas W. Diamond and Philip H. Dybvig “for research in banking and financial crises”.
The winners of the 2022 Nobel Prize in Economic Sciences have greatly improved our understanding of the role of banks in the economy, especially during financial crises. An important finding from their research was the explanation that avoiding bank collapse is crucial, says a press release.
For the economy to function, savings must be channeled into investment. However, there is a conflict: savers want instant access to their money in the event of unforeseen events, while businesses and homeowners need to know they won’t be forced to pay off their loans prematurely. Through their theory, Diamond and Dybvig showed how banks can provide a solution to this problem. By acting as an intermediary that accepts deposits from multiple entities, banks can allow depositors to access their money when they want, while also offering long-term loans.
Banking and Financial Crisis Research
But their analysis showed how the combination of these two activities can make banks vulnerable to rumors of an imminent collapse. If an increasing number of entities demand their money back from the bank, the rumor could become a self-fulfilling prophecy. These dangerous dynamics can be prevented by government action such as deposit insurance and bank loans of last resort.
A total of 53 Nobel Prizes for Economic Sciences have been awarded between 1969 and 2021. Of these, 25 awards have been given to a single laureate, while only two have been given to women, Elinor Ostrom in 2009 and Esther Duflo in 2019.
The youngest laureate of the Nobel Prize for Economic Sciences was only 46 years old when he won it, being Esther Duflo. On the other hand, Leonid Hurwicz was 90 years old when he was awarded the Nobel Prize for Economic Sciences, being the oldest winner of this category.
Nobel Prize for Economic Sciences, in memory of Alfred Nobel
In 1968, Sveriges Riksbank (Sweden’s central bank) established the award for this category in memory of Alfred Nobel, the founder of the Nobel Prizes.
On November 27, 1895, Alfred Nobel left precise instructions in his will that most of his fortune be used for a series of prizes, namely the Nobel Prizes.
Thus, Alfred Nobel left a large part of his fortune, more than 31 million Swedish kroner (SEK), to be converted into a fund and invested. The income generated by those investments would be “distributed annually in the form of prizes for those who in the previous year brought the greatest benefit to humanity.”
The Nobel Peace Prize, probably the most controversial
For 2022, the amount set for each individual Nobel Prize is 10 million Swedish kronor (SEK), or about $900,000.
The 2022 Nobel Prize season kicked off on Monday, October 3, with the announcement of the laureate for Physiology or Medicine, and the Nobel Prize for Economic Sciences concludes this year’s edition of the Nobel Prizes.
Perhaps the most controversial of all, the Nobel Peace Prize was awarded this year to human rights activists from Ukraine, Russia and Belarus. Two organizations were awarded, Memorial in Russia and Center for Civil Liberties in Ukraine. The 2022 Nobel Peace Prize is also shared with Ales Bialiatski, a human rights and democracy activist from Belarus.