Former Reserve Bank of India Governor and economist Raghuram Rajan said in a social media post that his friend Douglas Diamond – who won the Nobel Prize for Economics on Monday along with Ben S Bernanke and Philip H Dybvig – is one of the smartest people he knows. He called Diamond, who he has known since 1991, an extremely kind and a very modest person with a wicked sense of humour.
“I have known Doug since I joined Chicago in 1991. He is one of the smartest people I know (I say “one of” to avoid upsetting anyone). He is incredibly quick in understanding ideas and getting their essence. But unlike many academics with that kind of capability, he is also very modest and extremely kind. He is generous with his time, as verified by the legions of Ph.D. students he has had, and who remember their time with him fondly,” he said in an article that he wrote on Diamond for a Chicago Booth journal.
“Doug has a wicked sense of humor, delivering zingers in seminars and faculty lunches with a deadpan expression, but never at anyone’s expense. His colleagues also know him as the person who knows everything that is worth knowing, ranging from obscure papers on arcane subjects to which laptops one should order, and which credit cards offer the best deals,” said the economist in a LinkedIn post.
Rajan said that Diamond in many ways is the father of modern banking theory and it is fitting that the trio was recognised by the Nobel Committee. The former RBI Governor spoke about Diamond’s 1983 paper that explains how the “important value banks provide – of allowing investors to benefit from the high returns from long term investing while allowing those who need liquidity to withdraw their money without experiencing large losses — also exposes banks to depositor runs”.
Rajan also invoked Diamond’s 1984 paper on delegated monitoring which explains how diversified banks save on the costs of monitoring firms. The economist said that Diamond’s papers have deep insights and generations of researchers – including Rajan – have spent careers writing papers based on these papers.
Ben Benanke, who also won the Nobel for Economics along with Diamond, had stated that Diamond-Dybvig was “required reading” amid the 2008 financial crisis, said Rajan.
“For me, Doug embodies the ideal university professor, and he has been a mentor and a friend since the day I interviewed with him (and Rob Vishny) for a position at Chicago. The Nobel Prize is, of course, richly deserved because of the intellectual and practical influence his work has had. It also could not have gone to a better person,” said Rajan in the article, shared in his LinkedIn post.
Diamond, Dybvig, and Bernanke won the Nobel Prize for Economics for significantly improving the understanding of the role of banks in the economy, particularly during financial crises. “An important finding in their research is why avoiding bank collapses is vital,” said the Swedish Academy.
“The actions taken by central banks and financial regulators around the world in confronting two recent major crises – the Great Recession and the economic downturn that was generated by the COVID-19 pandemic – were in large part motivated by the laureates’ research,” it said.
Also read: Nobel Prize in Economics awarded to Ben Bernanke, Douglas Diamond and Philip Dybvig
