Nobel Economics Prize Awarded to Robert Hall and Michael Woodford

Two American economists, Robert E. Hall and Michael Woodford, have been awarded the Nobel memorial prize in economics for their research on helping governments and central banks manage economic shocks. The Royal Swedish Academy of Sciences announced the winners in Stockholm on Monday, citing their contribution to “the microeconomic foundations of macroeconomic stabilisation.”

Hall, who is affiliated with Stanford University in California at age 83, and Woodford, born in 1955 and affiliated with Columbia University in New York, were honored for work that helps smooth out the peaks and troughs of the economy, according to the academy.

John Hassler, chair of the Committee for the Prize in Economic Sciences, stated in a news release that the laureates’ research has provided a stable theoretical foundation for models currently used by central banks and governments worldwide. “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,” Hassler said.

The development of these models marks a shift from previous economic management strategies. For decades, policymakers followed the Depression-era prescriptions of British economist John Maynard Keynes, which involved lowering taxes and increasing government spending to restart growth. However, Timo Boppart of the Nobel economics prize committee noted that this Keynesian recipe “worked well – until it didn’t.” 

The limitations of the old formula became apparent during the stagflation of the 1970s, when the global economy experienced simultaneous high inflation and high unemployment. This disproved the previously held belief that unemployment would stay low during periods of high inflation. Hall and Woodford addressed this by creating improved models that accounted for how consumers and businesses actually make investment and spending decisions.

The economics prize is formally known as the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel. It was established by the central bank in 1968 as a memorial to the Swedish chemist and businessman who invented dynamite and endowed the five original Nobel Prizes. While technically not one of the original prizes, it is presented annually alongside them on December 10, the anniversary of Nobel’s death in 1896.

The prize money for 2026 is 12 million Swedish kronor (approximately $1.2 million), split between the two laureates. The majority of previous winners have been from the United States, with only three women having received the award; the most recent was Claudia Goldin in 2023.