Hall and Woodford win economics Nobel for stabilisation research
· BehindLines newsroom
The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, commonly called the economics Nobel, was awarded on Monday, October 12, to two Americans: Robert E. Hall of Stanford University and Michael Woodford of Columbia University. The Royal Swedish Academy of Sciences honoured their work on the microeconomic foundations of macroeconomic stabilisation: in other words, how governments and central banks try to soften the economy's ups and downs.
A response to the crisis of the 1970s
The committee recalls the historical setting. The oil shocks of the 1970s challenged the Keynesian models then in use. A decade of weak growth, high unemployment and strong inflation convinced many economists that stabilisation policies were doing more harm than good. Hall and Woodford proposed another approach: building models from the behaviour of households and businesses, rather than simply from statistical correlations between inflation, output and consumption.
The committee singles out Hall's research in the late 1970s on expectations and household consumption, and the comprehensive macroeconomic model Woodford presented in his 2003 book Interest and Prices. In remarks reported by The Guardian and relayed by MIT, committee chair John Hassler stressed that their research underpins the models used by central banks and governments.
Why it matters
When a central bank raises or lowers interest rates to curb inflation without undermining employment, it draws on tools descended from this work. The prize thus recognises research that has become part of the everyday toolkit of monetary policy. According to Stanford, the laureates, both MIT PhD graduates, share an award worth about 1.2 million dollars.
This award closes the 2026 Nobel season. Last year's economics prize went to Joel Mokyr, Philippe Aghion and Peter Howitt for their work on innovation and “creative destruction”.