NSF congratulates laureates of the 2022 Nobel Prize in economics

The U.S. National Science Foundation congratulates Ben S. Bernanke, Douglas W. Diamond and Philip H. Dybvig for their 2022 Nobel Memorial Prize in Economic Sciences. Their combined discoveries revealed the critical role that banks play in modern society and how banking regulation can help protect the public from a large-scale financial crisis by reducing the damage to individuals and businesses.

In the 1980s, Diamond and Dybvig revealed the unique role of banks in society as a necessary intermediary between people who are depositing money and people who are borrowing money, such as for purchasing a home or starting a new business. They created a theoretical model of the complex and mutually beneficial interplay between a bank's different customers and showed how banking regulation can support and sustain those public benefits.

Around the same time, Bernanke was independently conducting a statistical analysis of the causes of the Great Depression and why an initially modest recession snowballed into the greatest economic downturn of modern times. Contrary to conventional thinking among economists at the time, he discovered that the root cause was the large number of U.S. banks that failed in the early 1930s, breaking the system's unique ability to serve as an intermediary between depositors and borrowers.

NSF invested in the research of both Bernanke and Diamond. Beginning in the late 1980s, Diamond received multiple awards from NSF to investigate the nature of financial crises and how to mitigate them. Bernanke received a Graduate Research Fellowship from NSF in 1975, followed by several awards early in his career in the 1980s and 90s.

"NSF is proud to have supported the early-career research of these Nobel laureates," says NSF Director Sethuraman Panchanathan. "By challenging preconceived ideas, their findings remind us that there is room for transformative and innovative discoveries even in areas that we might take for granted or think we already understand."

Select journal publications

• Bank Runs, Deposit Insurance, and Liquidity (1983).
• Nonmonetary Effects of the Financial Crisis in the Propagation of the Great Depression (1983).
• Financial Intermediation and Delegated Monitoring (1984).

Select NSF awards

• Credit Rationing, Liquidity and the Macroeconomy (8007779).
• Information and Debt Markets: Reputation, Financial Intermediation and Optimal Maturity Structure (8896223).
• The Macroeconomics of the Interwar Period (8908073).
• A Theory of Banking, Bank Capital, and Financial Crises (9975209).