- Person
- Ben Bernanke
- Lived
- b. 1953
- Field
- Economics
- From
- American
The story
Ben Bernanke was born in Augusta, Georgia, in 1953 and grew up in a Jewish family in Dillon, South Carolina. He studied economics at Harvard and earned his PhD at MIT in 1979. As a graduate student he read Milton Friedman and Anna Schwartz's monetary history of the United States, and as a young professor he became fascinated by the Great Depression, the worst economic crisis in modern history.
In the early 1980s he combined statistical analysis with historical research to study what happened when thousands of American banks failed. Between 1930 and 1933 the number of banks halved, many destroyed by runs. He showed that bank runs were a decisive reason the crisis became so deep and lasted so long. When banks collapsed, the knowledge they held about their borrowers was lost and could not be quickly rebuilt, so savings could no longer flow efficiently into productive investment. Before his work, the banking crisis had usually been seen as a consequence of the slump rather than a cause.
In October 2022 the Royal Swedish Academy of Sciences awarded him the Nobel Memorial Prize in Economic Sciences, shared with Douglas Diamond and Philip Dybvig, "for research on banks and financial crises". Diamond and Dybvig had built a theory, also published in 1983, explaining why banks exist and why they are vulnerable to rumours that can set off runs, and how deposit insurance and a lender of last resort can prevent them. Together, the committee said, the three laid the foundations of modern banking research.
The committee said their analyses had been of great practical importance in regulating financial markets and handling crises. It noted that Bernanke's insight lay behind crucial elements of policy in 2008–2009, when he was chairman of the Federal Reserve and could put his research into practice, and that the laureates' work also helped keep the financial shock of the 2020 pandemic from becoming a new depression.
His research shows why well-functioning bank regulation matters: when banks fail in large numbers, the damage to households, farmers and businesses can last for years.
Why it matters
His research showed governments why keeping banks from collapsing matters, and in the committee’s words improved our ability to avoid both serious crises and expensive bailouts.
About Ben Bernanke
Economist of the Great Depression who chaired the Federal Reserve through the 2008 financial crisis and shared the 2022 Nobel Prize in Economic Sciences for research on banks and crises.
More about Ben Bernanke
- Ben Bernanke recorded crisis lessons for future leadersBen Bernanke wrote The Courage to Act (2015) and coauthored Firefighting (2019) with Timothy Geithner and Henry Paulson to pass on lessons from the 2008 crisis.
- Ben Bernanke wrote textbooks that taught economics widelyBen Bernanke coauthored two economics textbooks, edited the American Economic Review and is among the 50 most published economists in the world.
- Ben Bernanke showed how credit crunches deepen recessionsIn a 1983 paper Ben Bernanke showed that the financial chaos of 1930–33 made credit scarce and costly, a mechanism later called the financial accelerator.
Sources
- The Prize in Economic Sciences 2022: press release NobelPrize.org
- Ben Bernanke: Facts NobelPrize.org
- Ben Bernanke Wikipedia
- The Prize in Economic Sciences 2022: popular information NobelPrize.org
Another act of tikkun olam. This is part of tikkun olam, the Jewish idea of repairing the world, and every one of us can add to it.