Robert Hall and Michael Woodford Win 2026 Nobel Prize in Economics

Robert E. Hall of Stanford University and Michael Woodford of Columbia University won the 2026 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. The Royal Swedish Academy of Sciences announced the award on October 12 in Stockholm for “microeconomic foundations of macroeconomic stabilisation.”

The prize is worth 12 million Swedish kronor, about $1.2 million, to be shared. Hall, born in 1943 in Palo Alto, California, received his PhD from MIT in 1967. Woodford, born in 1955 in Chicopee, Massachusetts, received his PhD from MIT in 1983.

Hall’s 1978 paper on consumer behaviour showed that households prefer smooth consumption over time rather than following mechanical rules. Woodford built on that insight to develop the New Keynesian model, which incorporates forward-looking decisions by households and firms about spending, saving, and pricing. The model treats sticky prices and wages as central features and gives central banks a framework for setting interest rates and communicating future policy.

John Hassler, chair of the prize committee, said the laureates’ work has given central banks and finance ministries a stable theoretical foundation for the models they now use. The academy noted that the models proved useful during the pandemic and the energy shocks that followed. They allow policymakers to judge how changes in household expectations about future policy affect current spending and inflation.

The prize is the last of the 2026 Nobel awards. It is not one of the original prizes established by Alfred Nobel’s will but was created by Sweden’s central bank in 1968. Previous winners in the field include those who developed modern monetary theory and real business cycle models.

Hall is the Robert and Carole McNeil Joint Hoover Senior Fellow at Stanford. Woodford is the John Bates Clark Professor of Political Economy at Columbia. Both have advised central banks. Their framework now underpins the forecasting and policy tools at the Federal Reserve, the European Central Bank, and many others.

The award recognises a shift from purely statistical links between inflation, output, and unemployment toward models grounded in individual decisions. Households that expect higher future interest rates may spend less today. Firms that expect sustained demand may raise prices more slowly. These channels give policymakers levers that older Keynesian models lacked.

Woodford spoke briefly after the announcement from New York and called the prize a tremendous honour and a surprise. Hall’s earlier work on consumption and his later contributions to macro modelling sit at the centre of the citation. The academy’s scientific background paper details how the micro foundations improved the design of stabilisation policy after the oil shocks of the 1970s exposed weaknesses in earlier approaches.

Central banks already embed versions of these models in their staff forecasts. The prize confirms the practical reach of the research that began in academic journals decades ago.