Robert Hall and Michael Woodford win 2026 Nobel economics prize for macro stabilization research

The award

The Royal Swedish Academy of Sciences announced on Monday, 12 October 2026, that the 2026 Nobel Prize in Economic Sciences goes to Robert E. Hall, professor at Stanford University, and Michael Woodford, professor at Columbia University in New York. The jury cited their work on the microeconomic foundations of macroeconomic stabilization. Hall is 83 and was born in California in 1943, while Woodford was born in Massachusetts in 1955. Woodford joined the announcement by live link from New York and described the award as a great honour and a surprise.

Hassler, chair of the prize committee, said the laureates' work gave a solid theoretical foundation to the models that central banks and governments around the world use today. He said these models leave policymakers better equipped to handle economic shocks such as energy crises or sudden changes in household consumption.

What the laureates built

Hall and Woodford reworked the models that policymakers rely on. Instead of building models on statistical relationships between variables such as inflation, output and consumption, they built them on microeconomic foundations that capture how the actions of many individual households and firms affect the economy. A central feature of these models is that households and firms make saving and pricing decisions based on their expectations of the future. Governments and central banks can influence those expectations, for example when a central bank gives financial markets hints about its future interest rate path.

The jury said that timely fiscal and monetary measures, guided by these models, can ease the peaks and troughs of economic fluctuations. Hall's earlier work from 1978 showed that if households spend in anticipation of their future income, changes in their consumption depend on new and unpredictable information. The jury said Hall resolved a question that had intrigued researchers for a long time. Woodford said his aim was to create a better basis for economic policy debate and to help the public understand economic relationships.

Why the older Keynesian approach fell short

For a long time, economic policy was shaped by the theory of John Maynard Keynes, which is almost one hundred years old. In recessions, Keynesian policy cuts interest rates and widens the budget deficit to stimulate the economy, while the reverse is meant to cool an overheating economy. The approach ran into limits during the oil crises of the 1970s. According to the jury, those policies did not reduce unemployment and instead led to uncontrolled inflation. The West then went through a decade of low growth, high unemployment and high inflation, and Keynesianism fell into disrepute.

The Keynesian models used for decades to decide how and when to respond to recessions stopped working in the 1970s oil shock. Hall and Woodford set out to develop new tools to identify which measures would be most effective.

Background on the prize

The prize is officially named the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. It is not provided for in Alfred Nobel's will. Sweden's central bank funded it in 1968 to mark its 300th anniversary, and it has been awarded since 1969. This year's award is worth 12 million Swedish kronor, about $1.2 million. It is the last of the Nobel prizes announced this season, after the medicine, physics, chemistry, literature and peace prizes in the previous week.

Last year's prize went to Joel Mokyr, Philippe Aghion and Peter Howitt for research on the growth effects of innovation, including the concept of creative destruction, in which new technologies and production methods replace older ones. Mokyr received one half of that prize, and Aghion and Howitt shared the other half.