Ben Bernanke Wins a Nobel, in Theory

An old joke that economists love to gossip that something might work in practice but does it work in theory? That comes to mind with the news that the former Chairman of the Federal Reserve Ben Bernanke is sharing this year’s Nobel Prize in economics for his research on financial crises. His insights worked in theory but not in practice.

Mr. Bernanke, Douglas Diamond and Philip Dybvig are sharing the Nobel Prize for work that increases understanding of the relationship between banking crises and the broader economy. The assumption for much of the 20th century was that banking crises were the result of negative developments on Main Street or on the farm.