Douglas Diamond

Douglas Warren Diamond is an economist and the Merton H. Miller Distinguished Service Professor of Finance at the University of Chicago’s Booth School of Business. In 2022, he was awarded the Nobel Memorial Prize in Economic Sciences.

Prof. Douglas Diamond reacts to winning Nobel Prize (Oct. 2022)

Diamond has been a professor at the University of Chicago since 1979. He specializes in the study of financial intermediaries, financial crises, and liquidity. Diamond is also a research associate of the National Bureau of Economic Research and a visiting scholar at the Federal Reserve Bank of Richmond. Diamond was president of the American Finance Association and the Western Finance Association and is a fellow of the Econometric Society, the American Academy of Arts and Sciences, and the American Finance Association. In 2012, he received the Morgan Stanley-American Finance Association Award for Excellence in Finance, and in 2016, he received the CME Group-Mathematical Sciences Research Institute (MSRI) Prize in Innovative Quantitative Applications. He is a member of the National Academy of Sciences.

Diamond has also taught at Yale and was a visiting professor at the MIT Sloan School of Management, the Hong Kong University of Science and Technology, and the University of Bonn.

In October 2022, Douglas Diamond was awarded the Nobel Memorial Prize in Economic Sciences for his groundbreaking research on banks and financial crises. Ben Bernanke and Philip H. Dybvig shared the award with Diamond. All three economists "have significantly improved our 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," the Royal Swedish Academy of Sciences said.

Douglas was selected because his theory shows how banks offer an optimal system and "by acting as intermediaries that accept deposits from many savers, banks can allow depositors to access their money when they wish, while also offering long-term loans to borrowers." He also has shown how banks perform a societally important function as intermediaries between savers and borrowers by "assessing borrowers' creditworthiness and ensuring that loans are used for good investments," according to the award committee.

Douglas Diamond published a paper with Philip H. Dybvig in 1983 discussing what became the Diamond-Dybvig model. The paper is one of the most widely cited papers in finance and economics. The Diamond-Dybvig model shows how banks serve the economy by creating liquidity, and how this liquidity creation subjects the banks to runs if there is not any deposit insurance or other protection.

Douglas Diamond earned a bachelor’s degree in economics from Brown University in 1975 and a Ph.D. in economics from Yale University in 1980.