An economics Nobel by and for central bankers

The committee that awards the Nobel Prize in Economics announced on Monday that it has chosen three US economists for the 2022 prize: former Federal Reserve Chairman Ben S. Bernanke, Douglas W. Diamond of the University of Chicago and Philip H. Dybvig of the University of Washington in St. The Louis Prize is for “Research on Banks and Financial Crisis”. The committee commended the winners for doing work of “very practical importance in regulating financial markets and addressing financial crises”. Many financial economists would disagree.

This is David R. Henderson’s first paragraph, “An Economics Nobel for and by Central Bankers,” The Wall Street JournalOctober 10, 2022 (Print edition October 11.)

I rarely like an editor’s title that I choose, but this time I do. The editor clearly picked up in my concluding paragraph:

The Nobel Prize in Economics is funded by Sweden’s central bank, not the Nobel Foundation. I usually don’t think it matters, but in this case I wonder if it does. The 2022 award appears to be an affirmation by central bankers of the value of central banking.

I’ll publish the whole thing on EconLog in 30 days.

I woke up at 2:45 PDT and turned on my computer to see who had won. Once I learned, I knew immediately that I knew enough to write the piece. (Sometimes I have to research for about an hour to make sure.) The main reason is that we cover all of these topics in detail in Jeff Hummel’s Master’s Course in Financial Theory at San Jose State in early 2021. Larry White’s analysis of the Diamond / Dybvig model of “banking” was invaluable, and Jeff walked us through it very carefully.

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