Hall and Woodford Win 2026 Nobel Economics Prize

Robert E. Hall and Michael Woodford won the 2026 Nobel economics prize on Monday. The Royal Swedish Academy of Sciences honored the two Americans for “microeconomic foundations of macroeconomic stabilisation” — the models central banks and governments now use to steady economies against outside shocks.

Hall, born in 1943 in Palo Alto, is a professor at Stanford University. Woodford, born in 1955 in Chicopee, Massachusetts, is a professor at Columbia University. They will split 12 million Swedish crowns, about $1.2 million.

Their starting point was the small decision. Instead of linking big variables — inflation, production, consumption — to each other, Hall and Woodford built their models from the bottom up: the household deciding whether to save or spend, the business deciding what price to set. Both look ahead. A family that expects higher prices tomorrow spends differently 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.”

Hall supplied an early building block in 1978, when he showed that consumers prefer to keep spending steady rather than let it swing with every paycheck. Woodford folded that insight into the New Keynesian model — the framework that now sits inside most of the world’s major central banks.

The test case was the financial crisis that began in 2008. With interest rates already near zero, there was nothing left to cut. Woodford’s work showed that clear statements about where rates were headed could steady the economy on their own. “Making more explicit statements about the likely future path of interest rate policy, as opposed to relying on simply being able to cut interest rates further immediately, that was an important part of the policy response in the years from 2009 onward,” he said.

The contrast was the 1970s. Oil shocks hit, inflation and unemployment rose together, and the old Keynesian playbook — spend more, cut taxes — stopped working. “Authorities shouldn’t view stabilization of the economy as an exercise that is simply conducted by people pulling levers to control the economy independently of what people in the economy understand about this,” Woodford told reporters by phone after the announcement.

Central banks are getting a live test of the framework again. After the inflation surge of 2022 that followed the Covid pandemic, they are now grappling with the energy shock triggered by the Iran war. “It’s a tremendous honour,” Woodford said of the prize. “It’s a surprise, but I’m feeling very good about it.”

The economics award is the last prize announced each Nobel season. It is not one of the five Alfred Nobel created; Sweden’s central bank established it in 1968. Last year’s winners — Joel Mokyr, Philippe Aghion and Peter Howitt — were honored for work on how new technology and production methods drive growth.