By Donald Gilpin

Ben Bernanke
(Photo by Princeton University, Office of Communications, Denise Applewhite)

Ben Bernanke, former Princeton University professor and economics department chair, has been awarded the 2022 Nobel Prize in economic sciences. The Royal Swedish Academy of Sciences announced the award on October 10 to Bernanke, along with Douglas Diamond of the University of Chicago and Philip Dybvig of Washington University in St. Louis, citing their work to enhance “our understanding of the role of banks in the economy, particularly during financial crises.”

Bernanke, who was a professor of economics and public affairs at Princeton from 1985 to 2002 and chairman of the economics department from 1996 to 2002, went on to serve two terms as chair of the Federal Reserve from 2006 to 2014, leading the Fed through the 2008 financial crisis. He was also chair of the President’s Council of Economic Advisers from 2005 to 2006.

The Swedish Academy noted that work from the early 1980s by the three economists  had provided insight into the role of banks in influencing the economy, especially in times of crisis. “Their analyses have been of great practical importance in regulating financial markets and dealing with financial crises,” the Nobel Committee wrote.

Bernanke wrote a landmark 1983 paper about the Great Depression in which he showed how bank runs had turned a recession into a global economic crisis, explaining how bank failures can be the cause, not just the result, of crisis.

Bernanke, who earned his bachelor’s degree from Harvard University and his Ph.D. from MIT, received an honorary degree from Princeton University in 2016. He was cited at the graduation ceremony that year for his role in helping to steer the country through the 2008 economic crisis and “preventing Great Depression 2.0 from his command post at the Federal Reserve.”

The Princeton University citation read, “When the house of cards crumbled in 2008, he and his colleagues first stabilized an epochal mess and then led the nation on a difficult path to recovery. His courage to act shored up America’s damaged financial foundations, and his steady hand at the helm inspired confidence when it was sorely needed.

His place in history is assured, the nation is in his debt. And we are proud to have this opportunity to honor him.”

Princeton University President Christopher L. Eisgruber responded to the Nobel Committee announcement on Monday.  “All of us at Princeton know Ben Bernanke to be not only a marvelous scholar but also a generous teacher, beloved colleague, and devoted University citizen,” he said, as quoted in a University press release. “By using his path-breaking research, extensive learning, and practical wisdom to help lead America through a difficult financial crisis, Ben has exemplified brilliantly Princeton’s commitment to be ‘in the nation’s service.’”

Bernanke is currently a Distinguished Fellow in Residence, Economic Studies, at the Brookings Institution in Washington, D.C., and he remains chair of the advisory council of Princeton University’s Bendheim Center for Finance, which he founded in 1997.

Princeton University Economics Professor and Bendheim Center Director Markus Brunnermeier emphasized Bernanke’s impact on the economics department at Princeton. “Ben was foundational in shaping the economics department at Princeton,” he said. “He put a lot of energy into building up the department and founded the Bendheim Center. In this way, he not only pushed the research frontier in economics and finance, but also others’ research at Princeton University. He had a big impact on the profession.”

It was while Bernanke was economics department chair that Princeton hired Nobel laureates, now professors emeritus, Paul Krugman (2008 Nobel) and Christopher Sims (2011 Nobel).

Princeton University Economics and Public Affairs Professor Alan Blinder, who played a prominent role in recruiting Bernanke to come to Princeton and preceded him as a vice chair at the Federal Reserve, recalled, “i was bowled over by young Ben Bernanke’s early work, and did everything I could to attract him to Princeton, where he fit perfectly and was very productive as a scholar. I practically cried when he left, though it was certainly for a good cause!”

The Nobel Prize in economics includes 10 million Swedish kroner, almost $900,000, divided evenly among the three recipients.