- Robert E. Hall and Michael Woodford won the 2026 Nobel Prize in Economic Sciences.
- They developed models improving fiscal and monetary policy timing and calibration.
- Their work revived Keynesian stabilization by modeling forward-looking households and firms.
Robert E. Hall of Stanford University and Michael Woodford of Columbia University have won the 2026 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel “for microeconomic foundations of macroeconomic stabilisation,” the Royal Swedish Academy of Sciences announced on Monday.
The duo developed macroeconomic models that have improved how policymakers time and calibrate fiscal and monetary measures to reduce the economy's peaks and troughs.
Stabilisation policy, rooted in John Maynard Keynes's ideas, came under heavy fire during the oil shocks of the 1970s. Then, Keynesian prescriptions failed to curb unemployment and instead fuelled runaway inflation. The decade of stagflation that followed led many to argue that such policy did more harm than good.
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Hall and Woodford helped revive it. Instead of relying on statistical links between variables like inflation, output and consumption, they built models from the ground up, based on how households and businesses actually behave.
At the core of their work is the idea that households and firms are forward-looking when deciding how much to save or how to price products. That gives governments and central banks a powerful lever. By clearly communicating their policy plans, they can shape expectations and steer the economy.
“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 Committee for the Prize in Economic Sciences. He added that these models leave policymakers better equipped to handle shocks such as energy crises or sudden shifts in household consumption.
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Notably, last year's prize for economics went to Joel Mokyr of Northwestern University, and Peter Howitt of Brown University for explaining innovation-driven economic growth. Mokyr received half the award for identifying the prerequisites for sustained growth through technological progress. Aghion and Howitt shared the other half for their theory of sustained growth through “creative destruction,” the process by which new products and technologies replace older ones.
In 2024, the prize was awarded to Daron Acemoglu and Simon Johnson of the Massachusetts Institute of Technology and James A. Robinson of the University of Chicago for their studies of how institutions are formed and how they affect prosperity. Their work helped explain the persistent gaps in wealth between nations.
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