Hall and Woodford Win 2026 Nobel in Economics for Stabilisation Models

The Royal Swedish Academy of Sciences awarded the 2026 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel to Robert E. Hall and Michael Woodford on Monday. The citation reads “for microeconomic foundations of macroeconomic stabilisation.” Each will receive half of the 12 million Swedish kronor prize, about $1.2 million total.

Hall, born in Palo Alto in 1943, is a professor at Stanford University. Woodford, born in Chicopee, Massachusetts in 1955, is a professor at Columbia University. Both earned their PhDs from MIT. The academy said their work rebuilt macroeconomic models on the decisions of individual households and firms rather than on statistical links between aggregate variables such as inflation, output and consumption.

John Hassler, chair of the prize committee, said the models supply a stable theoretical foundation now used by central banks and finance ministries. “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’s 1978 article on the preference for smooth consumption and Woodford’s development of the New Keynesian framework are the core contributions. The framework underpins concepts such as the output gap that policymakers track when setting interest rates and fiscal support.

Woodford, reached by phone in New York, said the award was a tremendous honour and a surprise. He noted that the models helped guide policy after the 2008 financial crisis. The current environment includes the energy shock from the Iran war and residual effects from the post-COVID inflation surge. Central banks have relied on these micro-founded tools to judge how quickly to tighten or ease policy without amplifying cycles.

The economics prize is the last announced this year. It was established by Sweden’s central bank in 1968 and is not one of the five awards created by Alfred Nobel’s 1895 will. It is presented with the others on 10 December. Most previous winners have been American. Only three women have received it, the most recent being Claudia Goldin in 2023.

The practical effect of the work is that stabilisation policy now starts from the behaviour of millions of separate actors. When a shock hits energy prices or household spending, the models show which combination of interest-rate changes and fiscal measures reduces the size of the resulting boom or bust. That is the concrete advance the academy recognised on Monday.