Most Nobel Laureates Develop Theories; Ben Bernanke Put His Into Practice

The former Fed chairman and two other academics developed the theoretical foundations for why banks exist and why bank panics hurt.

Critics sometimes ask what practical good economic theory has done. The Nobel Prize in Economic Sciences awarded to Ben Bernanke on Monday along with Douglas Diamond of the University of Chicago and Philip Dybvig of Washington University in St. Louis provides a rejoinder. The laureates independently developed the theoretical foundations for why banks exist and why bank panics hurt. Mr. Bernanke put those theories into practice when the stakes could scarcely have been higher: as Federal Reserve chairman during the global financial crisis of 2007-09.

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