On Monday, the Nobel Prize in economic sciences was awarded to three U.S.-based economists. Frankly, I didn’t know there was a Nobel Prize for economics. For something described as being awarded “for achievements that have conferred the greatest benefit to humankind,” according to nobelprize.org, one would think I’d have heard about it. Upon further reading, however, I realized that these laureates’ research is quite significant. No idea what a laureate is? That’s what I’m here for.
All Nobel Prizes are awarded in memory of Alfred Nobel, a Swedish chemist, engineer, and inventor. Sixty-seven years after Nobel’s death, the Swedish central bank donated to add a prize in economics. Throughout the years, Nobel Prizes in economics have been awarded for developing models that analyze economic processes, research in the theory of financial economics, and work showing how communities can equitably manage shared resources. Every year, letters are sent to people around the world asking for candidate nominations. After a committee chooses the laureates, or award winners, they’re approved by the Royal Swedish Academy of Sciences. Awards are announced in October and presented at the Nobel Prize award ceremony in Stockholm, Sweden, in December.
This year, the prizes were awarded to Ben S. Bernanke, Douglas W. Diamond, and Philip H. Dybvig. Their work began in the 1980s, starting with research into why banks collapse and how this worsens financial crises. Their work included ways to protect the system from this danger and how to deal with financial crises. During the financial crisis of 2008, their work became significant. Policymakers used their research during the disaster, including Bernanke himself, the Federal Reserve chair at the time, who essentially carried out an application of his research. Along with the U.S. Treasury Department, the Fed propped up major banks and eased a shortage of credit. To calm investors and strengthen big banks, Bernanke dropped short-term interest rates to zero and developed lending programs. These actions were accredited with stopping the 2008 recession from turning worse. In 2020, at the beginning of the pandemic, the three economists’ work was still relevant in responding to the brewing crisis. The entirety of the financial system today is less vulnerable due to the laureates’ work, which explains why banks are needed and how to protect them from their vulnerability.
Along with an 18-karat gold medal, the winners will split 10 million Swedish kronor, which is 902,000 USD. Tune in to watch the economists get awarded the prize for an achievement that truly benefited humankind.
~ Madison Keezer `26