they do not give us the precise route. they do not tell us the size at which a bank actually becomes “ too big to bis central bankers ’ speeches fail ”. they cannot help us understand the exact routes of contagion channels in the financial system. and they cannot help us develop the precise mechanisms for bailing in shareholders and creditors. we need formal models to solve these problems. and this brings us to what post - crisis economic research needs to achieve : it must pour old knowledge into new models. economics needs to seek the answers to its questions where they are actually to be found, even though there might not be a lamp to shine a light on the solution. 4. awarding of the carl menger prize ladies and gentlemen, economists are facing major challenges, for which they have recently received a lot of criticism but precious little praise. i am therefore glad to now present the carl menger prize, which will be awarded biennially at our annual meeting. since this is a first, i would like to begin by saying a thing or two about the prize. the carl menger prize is awarded by the verein fur socialpolitik in honour of innovative international research accomplishments in the field of monetary macroeconomics, monetary policy and foreign exchange policy – precisely the areas in which the crisis revealed gaps. jointly awarded by the oesterreichische nationalbank, the swiss national bank and the bundesbank, the prize money is €20, 000. candidates can be nominated in written proposals detailing their worthiness by the heads of the research departments of the three central banks as well as by the heads of the verein fur socialpolitik ’ s committees for monetary theory and policy, macroreconomics, and external economics theory and policy. the lead editors of our association periodicals – the german economic review and perspektiven der wirtschaftspolitik – are also eligible to nominate candidates. the prizewinners are chosen by a vote among the verein ’ s former and current chairs and by one representative ( each ) of the oesterreichische nationalbank, the swiss national bank and the bundesbank. i would like to leave the “ technicalities ” of the new prize at that. what is much more interesting is : who will the prizewinner be? ladies and gentlemen, it gives me great pleasure to announce that, for her outstanding academic achievements, the first carl menger prize is awarded to – ms helene rey

intellectual bankruptcy of economic research. nearly two weeks ago, chancellor merkel also made reference to this. at the 5th lindau meeting on economic sciences ( attended by nobel laureates in this field ), she noted that “ we are coming from years in which one (... ) did not always have the impression that economics already knew everything about the future. ” many are now indeed wondering quite fundamentally what use economics is to society. the question of the usefulness of economics to society is probably also a reason why, at the aforementioned gathering of nobel laureates, the closing panel discussion was entitled “ how useful is economics – how is economics useful? ” 3. the lessons of the crisis ladies and gentlemen, christoph schmidt, chair of the german council of economic experts, was quoted in yesterday ’ s frankfurter allgemeine zeitung newspaper as saying bis central bankers ’ speeches that, “ despite the uncertainty surrounding our statements, our work is still important because we can contribute to imposing a limited amount of order on a complex and uncertain world without feigning false certainties. ” the job of economics is to explain economic interrelationships and to use these explanations as a basis for making economic policy designed to increase public welfare. economics is thus, if we accept that view, a discipline which is certainly of relevance to society. however, we must admit that economics has not always been up to the task. the financial crisis showed that there were many things about financial markets which we did not know, and that much of what we thought we knew was not reality - based. this is not least because, some of the time, economists act much like the one in the story i told you at the beginning. often, they were looking where the light was, not necessarily where the knowledge was. in that vein, precisely what the standard macroeconomic models were lacking was the financial sector, which made these models incapable of predicting the financial crisis. the framework of these models therefore needs to be broadened. in the meantime, many highranking economists are working on integrating the financial sector into standard macroeconomic models : mark gertler, lawrence christiano, massimo rostagno, roberto motto and markus brunnermeier, to name but a few. although progress is being made, research has not yet reached the finishing line. but why was the financial sector missing from the models? well, it is undoubtedly very difficult to model it mathematically. this seems to have been a hurdle initially