Robert E. Hall of Stanford and Michael Woodford of Columbia have won the 2026 Nobel Prize in economics “for microeconomic foundations of macroeconomic stabilisation”. The Nobel committee says their models give central banks and governments a stable base for dealing with downturns and shocks.
The Royal Swedish Academy of Sciences announced on Monday, October 12, that the 2026 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel goes to two American economists, Robert E. Hall and Michael Woodford.
The Winners
| Robert E. Hall | Michael Woodford | |
|---|---|---|
| Born | 1943, Palo Alto, California | 1955, Chicopee, Massachusetts |
| PhD | MIT, 1967 | MIT, 1983 |
| Now | Professor, Stanford University | Professor, Columbia University |
The prize amount is 12 million Swedish kronor, shared equally.
What They Did
The academy says the pair “developed new macroeconomic models that have significantly improved our ability to implement effective stabilisation policy”. On the basis of these models, well-timed fiscal and monetary policy can reduce the economy’s peaks and troughs.
Stabilisation policy has been important since John Maynard Keynes launched his theories almost a century ago. In a recession, the economy is boosted by cutting interest rates and increasing the budget deficit; the opposite is done to slow a boom.
The Problem They Solved
During the oil crises of the 1970s, the Keynesian models seemed to stop working: they did not reduce unemployment but led to uncontrolled inflation. The West had a decade of low growth, high unemployment and high inflation, and many thought stabilisation policy had done more harm than good.
Hall and Woodford showed how the models could be rebuilt. Rather than relying on statistical links between variables such as inflation, production and consumption, they built them on a microeconomic foundation: an understanding of how the total mass of individual households and businesses affects the economy.
Why It Matters Today
“The laureates’ work has provided us with a stable theoretical foundation for the models that are now used by central banks and governments around the world,” said John Hassler, chair of the prize committee. “With them, we are better equipped to deal with shocks in the economy, such as energy crises or sudden changes in how much households consume.”
That is a timely point at a moment when governments and central banks are dealing with an energy shock of their own.
Image: The main building of the Royal Swedish Academy of Sciences in Stockholm (file photo). Photo: I99pema / Wikimedia Commons (CC BY-SA 4.0)
