The Nobel Economics Prize Rewards Bank Run Breakthroughs
Ones and Tooze
How Did Bank Runs Work?
Nobel Prize-winning economists Diamond and Dibbwig work on the nature of financial crises in general. Adam Sobel says they provide a microeconomic rationale for this inherently unstable structure, which we know has existed for some reason. He argues that once you've got a model like this, then you can legitimately model banking as a rational activity. The Nobel prize is 'a reminder of just how solipsistic the economics discipline is,' he adds.
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