8 ms·

Nobel Prize in Economics Awarded to Ben Bernanke, Douglas Diamond, Philip Dybvig

61 points by jhshah 4y ago

deleted 4y ago
[deleted]
johndoe0815 4y ago
Please be precise, this prize has nothing to do with the original Nobel prices. It's the Sveriges Riksbank's (central bank of Sweden) Prize in Economic Sciences in Memory of Alfred Nobel - as the headline of TFA also tells us.
- snake_doc 4y ago
  Semantics… even the Associated Press calls it the Nobel Prize in Economics: > STOCKHOLM (AP) — This year’s Nobel Prize in economic sciences has been awarded to the former chair of the U.S. Federal Reserve, Ben S. Bernanke, and two U.S.-based economists, Douglas W. Diamond and Philip H. Dybvig, “for research on banks and financial crises https://apnews.com/article/nobel-economy-bernanke-2bb3eaee673631c8f8a13a66dd1c946b https://apnews.com/article/nobel-economy-bernanke-2bb3eaee67...
  - johndoe0815 4y ago
    It's semantics, but it's still incorrect... Alfred Nobel never intended to award a prize in economics (and neither one in Mathematics, though the background of _that_ might be more interesting). From https://www.nobelprize.org/alfred-nobel/alfred-nobels-will/ https://www.nobelprize.org/alfred-nobel/alfred-nobels-will/ "The interest is to be divided into five equal parts and distributed as follows: one part to the person who made the most important discovery or invention in the field of physics; one part to the person who made the most important chemical discovery or improvement; one part to the person who made the most important discovery within the domain of physiology or medicine; one part to the person who, in the field of literature, produced the most outstanding work in an idealistic direction; and one part to the person who has done the most or best to advance fellowship among nations, the abolition or reduction of standing armies, and the establishment and promotion of peace congresses."
    - piva00 4y ago
      You are stretching the definition of Nobel Prizes to only be considered in its original form. Other prizes were included over time and are considered Nobel Prizes by the institution that awards them. You are creating a strawman to attack it. By any definition in 2022 the Economics prize is a Nobel Prize. You not recognising it due to your strict definition doesn't really change the reality that it's called a Nobel Prize. What a strange ghost to create and attack...
    - snake_doc 4y ago
      Please direct your concerns to AP if you find the common interpretation so appalling to be incorrect. Thanks. > Want to reach out with a comment or fact-checking suggestion? Do you see something that needs a correction? Email us at FactCheck@ap.org.
  - ekianjo 4y ago
    > Associated Press Since when is the AP a reliable reference?
- piva00 4y ago
  Which are awarded in name of the Nobel Prizes as you can check in their official website [1]. Nobel Prizes are awarded by different institutions [2]. There's nothing else to be precise about, you are being pedantic. [1] https://www.nobelprize.org/prizes/lists/all-nobel-prizes/ https://www.nobelprize.org/prizes/lists/all-nobel-prizes/ [2] https://www.nobelprize.org/the-nobel-prize-organisation/prize-awarding-institutions/ https://www.nobelprize.org/the-nobel-prize-organisation/priz...
- throw0101c 4y ago
  > Please be precise, this prize has nothing to do with the original Nobel prices. * https://dilbert.com/strip/2015-04-02 https://dilbert.com/strip/2015-04-02
faustlast 4y ago
I would like to see Taleb's reaction to this.
- hyperbovine 4y ago
  Something tells me you will.
- deleted 4y ago
  [deleted]
belter 4y ago
It's the "Nobel Memorial Prize in Economic Sciences", and it's Bernanke prize for his work before, after or during the crisis? https://en.wikipedia.org/wiki/Nobel_Memorial_Prize_in_Economic_Sciences https://en.wikipedia.org/wiki/Nobel_Memorial_Prize_in_Econom... "Bernanke Admits Fed Made Mistakes Combating Crisis 10 Years Ago" "...Former Federal Reserve Chairman Ben Bernanke acknowledged that policy makers made two critical errors fighting the financial crisis a decade ago: They failed to see it coming with such force then underestimated how much economic damage it would cause later..." - https://www.bloomberg.com/news/articles/2018-09-13/bernanke-admits-fed-made-mistakes-combating-crisis-10-years-ago https://www.bloomberg.com/news/articles/2018-09-13/bernanke-...
- T-A 4y ago
  https://www.nobelprize.org/prizes/economic-sciences/2022/popular-information/ https://www.nobelprize.org/prizes/economic-sciences/2022/pop... Bernanke’s research shows that bank crises can potentially have catastrophic consequences. This insight illustrates the importance of well-functioning bank regulation, and was also the reasoning behind crucial elements of economic policy during the financial crisis of 2008–2009. At this time, Bernanke was head of the US central bank, the Federal Reserve, and was able to put knowledge from research into policy. Later, when the pandemic hit in 2020, significant measures were taken to avoid a global financial crisis. The laureates’ insights have played an important role in ensuring these latter crises did not develop into new depressions with devastating consequences for society.
  - Lionga 4y ago
    The consequences of the FED money printing are just starting to show. The everything bubble this time might become much worse than the housing bubble of 2008.
    - jonnybgood 4y ago
      What if the Fed didn’t respond the way it did? What would of happened? And what were the alternatives?
dereg 4y ago
You can feel however you feel about Bernanke during his tenure as Fed Chair. He was certainly hard to like at times, perhaps sometimes too smug. But his work laying out the pernicious effects of deflationary feedback loops as as an academic is probably one of the most influential works of monetary economics out there. I suggest people actually reading his papers before making a knee jerk reaction.
- paganel 4y ago
  > pernicious effects of deflationary feedback loops Serious question: were those results really put to the test? Apart from looking back at the New Deal era and getting from there whatever it's politically convenient at any one point.
  - dereg 4y ago
    Bernanke has his fingerprints on every large central banks' response in the wake of the 2008 Global Financial Crisis. He flooded the system with liquidity to prevent what he observed in the Great Depression. Was he successful? Yes. We didn't suffer from a recession anywhere near the magnitude of the depression. Did you like how he did it and what happened as a result? I'm guessing you didn't.[1] Part of the fun of economic and monetary history is following the umpteen competing explanations for recessions and bubbles and piecing together a mosaic of all that seems to make sense. Bystanders have the luxury of not writing those papers unlike academics, who often chain themselves to their own work/school of thought. Every monetary theory is based on a very limited set of observations. Policies borne out of those theories are even more scarce. I don't expect anyone to be right or wrong all the time. In my opinion, the best way to understand economics is to have a base set of principles and be theoretically promiscuous. [1] I tend to be a free market fundamentalist so I didn't like it either. That doesn't mean it didn't work.
    - dmichulke 4y ago
      > Was he successful? Yes. We didn't suffer from a recession anywhere near the magnitude of the depression. So he diagnosed the problem, set the goal (avoid recession), and the time frame (no immediate recession) and judged his success (no recession so yesss!). Sounds a bit arbitrary to me, especially as now it becomes evident even to his disciples (Yellen, Kashkari, Powell) that the thing was merely postponed and aggravated.
paganel 4y ago
Bernanke, really? This has to be a joke.
- sbelskie 4y ago
  What about his 1980s work on bank runs and the Great Depression do you find so objectionable?
  - spaetzleesser 4y ago
    His works was useless in recognizing the 2008 bubble. He may have written some nice papers but when he was in charge he failed completely. He is simply not a good economist and his work didn't help with making good decisions.
    - AnimalMuppet 4y ago
      He failed at seeing it coming. Once it came, he did really well at damage control. That's not as good as preventing the crisis in the first place, but it's far more than nothing.
      - spaetzleesser 4y ago
        It's certainly not Noble Prize level.
  - paganel 4y ago
    First of all, it didn't help him with avoiding a bank run when he was actually put in charge of almost the whole thing a few decades later, which is a thing that happens to very few "Nobel"-like economists (Keynes and his involvement in Bretton-Woods comes to mind, and that's about it as far as I know). Second, I've always found those Great Depression/New Deal studies a little questionable when it comes to the science of economics, like I've partially hinted in another comment. It looks like the conclusion almost always aligns with the political leanings of those carrying out the study. Sure, maybe he deserves the Nobel for an interesting work of economic history (or whatever the official term is), but I have the impression that his papers on that period were used as "inputs" for his relatively recent economic decisions, so not as a history artefact.
snake_doc 4y ago
> Their discoveries improved how society deals with financial crises > This year’s laureates in the Economic Sciences, Ben Bernanke, Douglas Diamond and Philip Dybvig, have significantly improved our understanding of the role of banks in the economy, particularly during financial crises. An important finding in their research is why avoiding bank collapses is vital. > Modern banking research clarifies why we have banks, how to make them less vulnerable in crises and how bank collapses exacerbate financial crises. The foundations of this research were laid by Ben Bernanke, Douglas Diamond and Philip Dybvig in the early 1980s. Their analyses have been of great practical importance in regulating financial markets and dealing with financial crises. > For the economy to function, savings must be channelled to investments. However, there is a conflict here: savers want instant access to their money in case of unexpected outlays, while businesses and homeowners need to know they will not be forced to repay their loans prematurely. In their theory, Diamond and Dybvig show how banks offer an optimal solution to this problem. By acting as intermediaries that accept deposits from many savers, banks can allow depositors to access their money when they wish, while also offering long-term loans to borrowers. > However, their analysis also showed how the combination of these two activities makes banks vulnerable to rumours about their imminent collapse. If a large number of savers simultaneously run to the bank to withdraw their money, the rumour may become a self-fulfilling prophecy – a bank run occurs and the bank collapses. These dangerous dynamics can be prevented through the government providing deposit insurance and acting as a lender of last resort to banks. > Diamond demonstrated how banks perform another societally important function. As intermediaries between many savers and borrowers, banks are better suited to assessing borrowers’ creditworthiness and ensuring that loans are used for good investments. > Ben Bernanke analysed the Great Depression of the 1930s, the worst economic crisis in modern history. Among other things, he showed how bank runs were a decisive factor in the crisis becoming so deep and prolonged. When the banks collapsed, valuable information about borrowers was lost and could not be recreated quickly. Society’s ability to channel savings to productive investments was thus severely diminished. > “The laureates’ insights have improved our ability to avoid both serious crises and expensive bailouts,” says Tore Ellingsen, Chair of the Committee for the Prize in Economic Sciences. https://www.nobelprize.org/prizes/economic-sciences/2022/press-release/ https://www.nobelprize.org/prizes/economic-sciences/2022/pre...
- 4y ago
ianai 4y ago
Maybe this will remind people what the Fed of former years was like. I suspect Powells tenure will eventually be looked upon with scorn. I deeply suspected the market was overvalued in 2018. They should have been raising interest rates well before the pandemic. Then they wouldn’t have had to do quite as many unprecedented things, most likely. You do not want a Fed simply trying to time the market cycle around election cycles. And one has to wonder what they were up to in 15-16. And 17, 18, 19, etc. Edit-but not to say Bernankes time was great. Just that sometimes a historical contrast to the present makes things really stick out. I can never forgive bailing out banks, inventing the concept “too big to fail”, and pushing people out of their homes and into the streets. I was directly affected by that and just might never own a house as part of the long term fallout.
- Hendrikto 4y ago
  > They should have been raising interest rates well before the pandemic. Should have, but could not. They did not let the recession of 2008/2009 play out, and the whole system has since only been propped up by the fed. They knew that a recession would commence the second they took their foot off the gas.
- senthil_rajasek 4y ago
  >They should have been raising interest rates well before the pandemic. The Fed in fact tried to tighten during the 2015 - 2018 period but in 2018, politics interferred. https://en.m.wikipedia.org/wiki/History_of_Federal_Open_Market_Committee_actions https://en.m.wikipedia.org/wiki/History_of_Federal_Open_Mark...
  - ianai 4y ago
    18 is when then president Trump appointed Powell after not re-appointing Yellen. I don’t see that pointed out in your link.
- throw0101c 4y ago
  > They should have been raising interest rates well before the pandemic. They did? * https://fred.stlouisfed.org/series/FEDFUNDS https://fred.stlouisfed.org/series/FEDFUNDS Do people not remember that there were already predictions of an upcoming recession by H2 2019? * https://www.motherjones.com/kevin-drum/2019/08/the-great-yield-curve-inversion-of-2019/ https://www.motherjones.com/kevin-drum/2019/08/the-great-yie... * https://www.forbes.com/sites/chuckjones/2020/12/31/2019s-yield-curve-inversion-means-a-recession-could-hit-in-2020/ https://www.forbes.com/sites/chuckjones/2020/12/31/2019s-yie... An October 2019 interview with Campbell Harvey, who originally noticed the rate inversion phenomena in a paper he published: * https://www.youtube.com/watch?v=9sb1byR8Zx0 https://www.youtube.com/watch?v=9sb1byR8Zx0
raspberry1337 4y ago
Economics is not a science. Most papers in finance/economics are not repeatable or even applicable in real life - as was displayed when the worlds number one hedgefund started the process of reading published financial papers and trying to apply them [1] [1]https://www.goodreads.com/book/show/43889703-the-man-who-solved-the-market https://www.goodreads.com/book/show/43889703-the-man-who-sol...
- pas 4y ago
  do they use the scientific method? yes. it's science. is it good science? that's of course a bit subjective, but the trend in looking for clever natural experiments is, IHMO, a good direction. of course there is a long way to get there as you point out, replication, due to confounders and whatnot is still a big issue.
  - raspberry1337 4y ago
    >do they use the scientific method? yes. it's science. "The scientific method is the process of objectively establishing facts through testing and experimentation" [1] But economics does not objectively establish facts, it establishes subjective facts. Since every "experiment" is conducted in theory or in a simulation at best, and not in the real market - it pretends to investigate reality when in fact all it experiments with is pick-and-choose model of that reality. That picking and choosing is a very subjective process, hence why we can have chicago and marxists economists both claiming each their "scientific" correctness. Take a look at the papers that just won the nobel prize. Not a single one of them is a repeatable experiment, because such a thing is impossible in real-market economics. The market changes at all times, and is unique at all times. Economics can only be a science if we accept that science does not have to able to produce repeteable experiments, merely the attempt of doing so is enough to qualify as science. [1] https://www.techtarget.com/whatis/definition/scientific-method#:~:text=The%20scientific%20method%20is%20the,and%20finally%20analyzing%20the%20results https://www.techtarget.com/whatis/definition/scientific-meth....
    - ianai 4y ago
swader999 4y ago
Proven 4y ago
avidphantasm 4y ago
How fitting, a pseudo-Nobel Prize for a pseudo-science.
spaetzleesser 4y ago
Bernanke maybe wrote some nice papers. I remember him being called the "scholar of the Great Depression" but when it was time to use his research and to recognize the 2008 bubble he completely failed. I still remember him proclaiming how everything was just fine while things were already falling apart. And his response was to shovel even more money at the banks and wealthy people while they let regular people lose their houses left and right. And let's see how the current credit bubble that got started by Bernanke will end. In my view Bernanke was a total failure when it counted. This is almost as bad as giving the Peace Prize to Obama.
polymathemagics 4y ago
Reading these comments make me feel sad about the state of Hacker News. As with any large public forum, it's turning into an anti intellectual space where takes like "economics is not a science, it's a social science!" are the best we have to offer. It's either engineer syndrome, or it's brigading from other niche political forums. I'm tired of reading knee jerk reactions to fields from commenters that have zero experience in but have all the conviction in the world.
- bitxbitxbitcoin 4y ago
  It’s the same vein as the comments in cryptocurrency/blockchain tech threads.
- VictorPath 4y ago
  > turning into an anti intellectual space where takes like "economics is not a science, it's a social science!" are the best we have to offer A bank taking an endowment awarding a prize and money to physicists, chemists and biologists, and ramming in to it a prize for economists saying nonsense the bankers like to hear, is the definition of anti-intellectual. The physicists, chemists and biologists are the intellectuals and scientists, the economists are frauds telling the bankers what they want to hear.
  - snake_doc 4y ago
    Argument: > turning into an anti intellectual space where takes like "economics is not a science, it's a social science!" are the best we have to offer Evidence: VictorPath's reply > A bank taking an endowment awarding a prize and money to physicists, chemists and biologists, and ramming in to it a prize for economists saying nonsense the bankers like to hear, is the definition of anti-intellectual. The physicists, chemists and biologists are the intellectuals and scientists, the economists are frauds telling the bankers what they want to hear. Q.E.D.
  - kiba 4y ago
    Neither of these intellectuals and scientists are any good for doing economics, precisely because they are on a wrong level of abstraction.
jeffreyrogers 4y ago
Bernanke's memoir is good. Easy to take shots at someone like him, but he was one of the most important decision makers in the world post-financial crisis and the world would likely be worse off today if someone else were in his spot. The memoir explains his decision making process and also some of his past research which was relevant to the GFC (he specialized in the great depression).
kramerger 4y ago
Please note that Bernanke was awarded for his earlier research, and "definitely not for his work at the central bank" (actual quote from the TV interview)

61 points by jhshah 4y ago

deleted 4y ago

[deleted]

Please be precise, this prize has nothing to do with the original Nobel prices. It's the Sveriges Riksbank's (central bank of Sweden) Prize in Economic Sciences in Memory of Alfred Nobel - as the headline of TFA also tells us.

snake_doc 4y ago
Semantics… even the Associated Press calls it the Nobel Prize in Economics: > STOCKHOLM (AP) — This year’s Nobel Prize in economic sciences has been awarded to the former chair of the U.S. Federal Reserve, Ben S. Bernanke, and two U.S.-based economists, Douglas W. Diamond and Philip H. Dybvig, “for research on banks and financial crises https://apnews.com/article/nobel-economy-bernanke-2bb3eaee673631c8f8a13a66dd1c946b https://apnews.com/article/nobel-economy-bernanke-2bb3eaee67...
- johndoe0815 4y ago
  It's semantics, but it's still incorrect... Alfred Nobel never intended to award a prize in economics (and neither one in Mathematics, though the background of _that_ might be more interesting). From https://www.nobelprize.org/alfred-nobel/alfred-nobels-will/ https://www.nobelprize.org/alfred-nobel/alfred-nobels-will/ "The interest is to be divided into five equal parts and distributed as follows: one part to the person who made the most important discovery or invention in the field of physics; one part to the person who made the most important chemical discovery or improvement; one part to the person who made the most important discovery within the domain of physiology or medicine; one part to the person who, in the field of literature, produced the most outstanding work in an idealistic direction; and one part to the person who has done the most or best to advance fellowship among nations, the abolition or reduction of standing armies, and the establishment and promotion of peace congresses."
  - piva00 4y ago
    You are stretching the definition of Nobel Prizes to only be considered in its original form. Other prizes were included over time and are considered Nobel Prizes by the institution that awards them. You are creating a strawman to attack it. By any definition in 2022 the Economics prize is a Nobel Prize. You not recognising it due to your strict definition doesn't really change the reality that it's called a Nobel Prize. What a strange ghost to create and attack...
  - snake_doc 4y ago
    Please direct your concerns to AP if you find the common interpretation so appalling to be incorrect. Thanks. > Want to reach out with a comment or fact-checking suggestion? Do you see something that needs a correction? Email us at FactCheck@ap.org.
- ekianjo 4y ago
  > Associated Press Since when is the AP a reliable reference?
piva00 4y ago
Which are awarded in name of the Nobel Prizes as you can check in their official website [1]. Nobel Prizes are awarded by different institutions [2]. There's nothing else to be precise about, you are being pedantic. [1] https://www.nobelprize.org/prizes/lists/all-nobel-prizes/ https://www.nobelprize.org/prizes/lists/all-nobel-prizes/ [2] https://www.nobelprize.org/the-nobel-prize-organisation/prize-awarding-institutions/ https://www.nobelprize.org/the-nobel-prize-organisation/priz...
throw0101c 4y ago
> Please be precise, this prize has nothing to do with the original Nobel prices. * https://dilbert.com/strip/2015-04-02 https://dilbert.com/strip/2015-04-02

faustlast 4y ago

I would like to see Taleb's reaction to this.

hyperbovine 4y ago
Something tells me you will.
deleted 4y ago
[deleted]

belter 4y ago

It's the "Nobel Memorial Prize in Economic Sciences", and it's Bernanke prize for his work before, after or during the crisis? https://en.wikipedia.org/wiki/Nobel_Memorial_Prize_in_Economic_Sciences https://en.wikipedia.org/wiki/Nobel_Memorial_Prize_in_Econom... "Bernanke Admits Fed Made Mistakes Combating Crisis 10 Years Ago" "...Former Federal Reserve Chairman Ben Bernanke acknowledged that policy makers made two critical errors fighting the financial crisis a decade ago: They failed to see it coming with such force then underestimated how much economic damage it would cause later..." - https://www.bloomberg.com/news/articles/2018-09-13/bernanke-admits-fed-made-mistakes-combating-crisis-10-years-ago https://www.bloomberg.com/news/articles/2018-09-13/bernanke-...

T-A 4y ago
https://www.nobelprize.org/prizes/economic-sciences/2022/popular-information/ https://www.nobelprize.org/prizes/economic-sciences/2022/pop... Bernanke’s research shows that bank crises can potentially have catastrophic consequences. This insight illustrates the importance of well-functioning bank regulation, and was also the reasoning behind crucial elements of economic policy during the financial crisis of 2008–2009. At this time, Bernanke was head of the US central bank, the Federal Reserve, and was able to put knowledge from research into policy. Later, when the pandemic hit in 2020, significant measures were taken to avoid a global financial crisis. The laureates’ insights have played an important role in ensuring these latter crises did not develop into new depressions with devastating consequences for society.
- Lionga 4y ago
  The consequences of the FED money printing are just starting to show. The everything bubble this time might become much worse than the housing bubble of 2008.
  - jonnybgood 4y ago
    What if the Fed didn’t respond the way it did? What would of happened? And what were the alternatives?

dereg 4y ago

You can feel however you feel about Bernanke during his tenure as Fed Chair. He was certainly hard to like at times, perhaps sometimes too smug. But his work laying out the pernicious effects of deflationary feedback loops as as an academic is probably one of the most influential works of monetary economics out there. I suggest people actually reading his papers before making a knee jerk reaction.

paganel 4y ago
> pernicious effects of deflationary feedback loops Serious question: were those results really put to the test? Apart from looking back at the New Deal era and getting from there whatever it's politically convenient at any one point.
- dereg 4y ago
  Bernanke has his fingerprints on every large central banks' response in the wake of the 2008 Global Financial Crisis. He flooded the system with liquidity to prevent what he observed in the Great Depression. Was he successful? Yes. We didn't suffer from a recession anywhere near the magnitude of the depression. Did you like how he did it and what happened as a result? I'm guessing you didn't.[1] Part of the fun of economic and monetary history is following the umpteen competing explanations for recessions and bubbles and piecing together a mosaic of all that seems to make sense. Bystanders have the luxury of not writing those papers unlike academics, who often chain themselves to their own work/school of thought. Every monetary theory is based on a very limited set of observations. Policies borne out of those theories are even more scarce. I don't expect anyone to be right or wrong all the time. In my opinion, the best way to understand economics is to have a base set of principles and be theoretically promiscuous. [1] I tend to be a free market fundamentalist so I didn't like it either. That doesn't mean it didn't work.
  - dmichulke 4y ago
    > Was he successful? Yes. We didn't suffer from a recession anywhere near the magnitude of the depression. So he diagnosed the problem, set the goal (avoid recession), and the time frame (no immediate recession) and judged his success (no recession so yesss!). Sounds a bit arbitrary to me, especially as now it becomes evident even to his disciples (Yellen, Kashkari, Powell) that the thing was merely postponed and aggravated.

paganel 4y ago

Bernanke, really? This has to be a joke.

sbelskie 4y ago
What about his 1980s work on bank runs and the Great Depression do you find so objectionable?
- spaetzleesser 4y ago
  His works was useless in recognizing the 2008 bubble. He may have written some nice papers but when he was in charge he failed completely. He is simply not a good economist and his work didn't help with making good decisions.
  - AnimalMuppet 4y ago
    He failed at seeing it coming. Once it came, he did really well at damage control. That's not as good as preventing the crisis in the first place, but it's far more than nothing.
    - spaetzleesser 4y ago
      It's certainly not Noble Prize level.
- paganel 4y ago
  First of all, it didn't help him with avoiding a bank run when he was actually put in charge of almost the whole thing a few decades later, which is a thing that happens to very few "Nobel"-like economists (Keynes and his involvement in Bretton-Woods comes to mind, and that's about it as far as I know). Second, I've always found those Great Depression/New Deal studies a little questionable when it comes to the science of economics, like I've partially hinted in another comment. It looks like the conclusion almost always aligns with the political leanings of those carrying out the study. Sure, maybe he deserves the Nobel for an interesting work of economic history (or whatever the official term is), but I have the impression that his papers on that period were used as "inputs" for his relatively recent economic decisions, so not as a history artefact.

snake_doc 4y ago

> Their discoveries improved how society deals with financial crises > This year’s laureates in the Economic Sciences, Ben Bernanke, Douglas Diamond and Philip Dybvig, have significantly improved our understanding of the role of banks in the economy, particularly during financial crises. An important finding in their research is why avoiding bank collapses is vital. > Modern banking research clarifies why we have banks, how to make them less vulnerable in crises and how bank collapses exacerbate financial crises. The foundations of this research were laid by Ben Bernanke, Douglas Diamond and Philip Dybvig in the early 1980s. Their analyses have been of great practical importance in regulating financial markets and dealing with financial crises. > For the economy to function, savings must be channelled to investments. However, there is a conflict here: savers want instant access to their money in case of unexpected outlays, while businesses and homeowners need to know they will not be forced to repay their loans prematurely. In their theory, Diamond and Dybvig show how banks offer an optimal solution to this problem. By acting as intermediaries that accept deposits from many savers, banks can allow depositors to access their money when they wish, while also offering long-term loans to borrowers. > However, their analysis also showed how the combination of these two activities makes banks vulnerable to rumours about their imminent collapse. If a large number of savers simultaneously run to the bank to withdraw their money, the rumour may become a self-fulfilling prophecy – a bank run occurs and the bank collapses. These dangerous dynamics can be prevented through the government providing deposit insurance and acting as a lender of last resort to banks. > Diamond demonstrated how banks perform another societally important function. As intermediaries between many savers and borrowers, banks are better suited to assessing borrowers’ creditworthiness and ensuring that loans are used for good investments. > Ben Bernanke analysed the Great Depression of the 1930s, the worst economic crisis in modern history. Among other things, he showed how bank runs were a decisive factor in the crisis becoming so deep and prolonged. When the banks collapsed, valuable information about borrowers was lost and could not be recreated quickly. Society’s ability to channel savings to productive investments was thus severely diminished. > “The laureates’ insights have improved our ability to avoid both serious crises and expensive bailouts,” says Tore Ellingsen, Chair of the Committee for the Prize in Economic Sciences. https://www.nobelprize.org/prizes/economic-sciences/2022/press-release/ https://www.nobelprize.org/prizes/economic-sciences/2022/pre...

4y ago

ianai 4y ago

Maybe this will remind people what the Fed of former years was like. I suspect Powells tenure will eventually be looked upon with scorn. I deeply suspected the market was overvalued in 2018. They should have been raising interest rates well before the pandemic. Then they wouldn’t have had to do quite as many unprecedented things, most likely. You do not want a Fed simply trying to time the market cycle around election cycles. And one has to wonder what they were up to in 15-16. And 17, 18, 19, etc. Edit-but not to say Bernankes time was great. Just that sometimes a historical contrast to the present makes things really stick out. I can never forgive bailing out banks, inventing the concept “too big to fail”, and pushing people out of their homes and into the streets. I was directly affected by that and just might never own a house as part of the long term fallout.

Hendrikto 4y ago
> They should have been raising interest rates well before the pandemic. Should have, but could not. They did not let the recession of 2008/2009 play out, and the whole system has since only been propped up by the fed. They knew that a recession would commence the second they took their foot off the gas.
senthil_rajasek 4y ago
>They should have been raising interest rates well before the pandemic. The Fed in fact tried to tighten during the 2015 - 2018 period but in 2018, politics interferred. https://en.m.wikipedia.org/wiki/History_of_Federal_Open_Market_Committee_actions https://en.m.wikipedia.org/wiki/History_of_Federal_Open_Mark...
- ianai 4y ago
  18 is when then president Trump appointed Powell after not re-appointing Yellen. I don’t see that pointed out in your link.
throw0101c 4y ago
> They should have been raising interest rates well before the pandemic. They did? * https://fred.stlouisfed.org/series/FEDFUNDS https://fred.stlouisfed.org/series/FEDFUNDS Do people not remember that there were already predictions of an upcoming recession by H2 2019? * https://www.motherjones.com/kevin-drum/2019/08/the-great-yield-curve-inversion-of-2019/ https://www.motherjones.com/kevin-drum/2019/08/the-great-yie... * https://www.forbes.com/sites/chuckjones/2020/12/31/2019s-yield-curve-inversion-means-a-recession-could-hit-in-2020/ https://www.forbes.com/sites/chuckjones/2020/12/31/2019s-yie... An October 2019 interview with Campbell Harvey, who originally noticed the rate inversion phenomena in a paper he published: * https://www.youtube.com/watch?v=9sb1byR8Zx0 https://www.youtube.com/watch?v=9sb1byR8Zx0

raspberry1337 4y ago

Economics is not a science. Most papers in finance/economics are not repeatable or even applicable in real life - as was displayed when the worlds number one hedgefund started the process of reading published financial papers and trying to apply them [1] [1]https://www.goodreads.com/book/show/43889703-the-man-who-solved-the-market https://www.goodreads.com/book/show/43889703-the-man-who-sol...

pas 4y ago
do they use the scientific method? yes. it's science. is it good science? that's of course a bit subjective, but the trend in looking for clever natural experiments is, IHMO, a good direction. of course there is a long way to get there as you point out, replication, due to confounders and whatnot is still a big issue.
- raspberry1337 4y ago
  >do they use the scientific method? yes. it's science. "The scientific method is the process of objectively establishing facts through testing and experimentation" [1] But economics does not objectively establish facts, it establishes subjective facts. Since every "experiment" is conducted in theory or in a simulation at best, and not in the real market - it pretends to investigate reality when in fact all it experiments with is pick-and-choose model of that reality. That picking and choosing is a very subjective process, hence why we can have chicago and marxists economists both claiming each their "scientific" correctness. Take a look at the papers that just won the nobel prize. Not a single one of them is a repeatable experiment, because such a thing is impossible in real-market economics. The market changes at all times, and is unique at all times. Economics can only be a science if we accept that science does not have to able to produce repeteable experiments, merely the attempt of doing so is enough to qualify as science. [1] https://www.techtarget.com/whatis/definition/scientific-method#:~:text=The%20scientific%20method%20is%20the,and%20finally%20analyzing%20the%20results https://www.techtarget.com/whatis/definition/scientific-meth....
  - ianai 4y ago

swader999 4y ago

Proven 4y ago

avidphantasm 4y ago

How fitting, a pseudo-Nobel Prize for a pseudo-science.

spaetzleesser 4y ago

Bernanke maybe wrote some nice papers. I remember him being called the "scholar of the Great Depression" but when it was time to use his research and to recognize the 2008 bubble he completely failed. I still remember him proclaiming how everything was just fine while things were already falling apart. And his response was to shovel even more money at the banks and wealthy people while they let regular people lose their houses left and right. And let's see how the current credit bubble that got started by Bernanke will end. In my view Bernanke was a total failure when it counted. This is almost as bad as giving the Peace Prize to Obama.

polymathemagics 4y ago

Reading these comments make me feel sad about the state of Hacker News. As with any large public forum, it's turning into an anti intellectual space where takes like "economics is not a science, it's a social science!" are the best we have to offer. It's either engineer syndrome, or it's brigading from other niche political forums. I'm tired of reading knee jerk reactions to fields from commenters that have zero experience in but have all the conviction in the world.

bitxbitxbitcoin 4y ago
It’s the same vein as the comments in cryptocurrency/blockchain tech threads.
VictorPath 4y ago
> turning into an anti intellectual space where takes like "economics is not a science, it's a social science!" are the best we have to offer A bank taking an endowment awarding a prize and money to physicists, chemists and biologists, and ramming in to it a prize for economists saying nonsense the bankers like to hear, is the definition of anti-intellectual. The physicists, chemists and biologists are the intellectuals and scientists, the economists are frauds telling the bankers what they want to hear.
- snake_doc 4y ago
  Argument: > turning into an anti intellectual space where takes like "economics is not a science, it's a social science!" are the best we have to offer Evidence: VictorPath's reply > A bank taking an endowment awarding a prize and money to physicists, chemists and biologists, and ramming in to it a prize for economists saying nonsense the bankers like to hear, is the definition of anti-intellectual. The physicists, chemists and biologists are the intellectuals and scientists, the economists are frauds telling the bankers what they want to hear. Q.E.D.
- kiba 4y ago
  Neither of these intellectuals and scientists are any good for doing economics, precisely because they are on a wrong level of abstraction.

jeffreyrogers 4y ago

Bernanke's memoir is good. Easy to take shots at someone like him, but he was one of the most important decision makers in the world post-financial crisis and the world would likely be worse off today if someone else were in his spot. The memoir explains his decision making process and also some of his past research which was relevant to the GFC (he specialized in the great depression).

kramerger 4y ago

Please note that Bernanke was awarded for his earlier research, and "definitely not for his work at the central bank" (actual quote from the TV interview)