American economists Robert E. Hall and Michael Woodford have been awarded the 2026 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for work that reshaped how policymakers analyse economic fluctuations.
The Royal Swedish Academy of Sciences announced the award on 12 October, citing the pair’s contribution to the microeconomic foundations of macroeconomic stabilisation. The prize is worth 12 million Swedish kronor, shared equally between the two laureates.
Hall is a professor at Stanford University and Woodford is a professor at Columbia University. Their research helped build models of the economy from the decisions of individual households and firms, rather than relying only on broad statistical relationships between measures such as inflation, output and consumption.
From household choices to economic policy
The distinction matters because decisions about spending, saving, hiring and prices are shaped by what people expect to happen next. A household considering whether to spend or save may respond to expected future income. A firm setting prices may take account of expected costs and the likely actions of competitors.
Those expectations can also be influenced by policy. When governments and central banks explain their plans, households and businesses may adjust their behaviour before a change takes effect. In this framework, stabilisation is not simply a matter of moving interest rates or public spending up and down; it also depends on how policy is understood.
The award recognises research that helped make these expectations central to modern macroeconomic models. Such models are now used by central banks and governments to assess how policy decisions may affect economic activity. Their purpose is to help reduce the depth of downturns and prevent excessive overheating during booms.
Why the foundations changed
The historical setting for the work includes the experience of the 1970s, when oil crises coincided with weak growth, high unemployment and rising prices. Existing Keynesian models appeared unable to explain the combination, and some economists questioned whether stabilisation policy could work at all.
Hall and Woodford contributed to rebuilding the analytical basis for such policy. The approach starts with how households and businesses make choices over time and builds up to economy-wide outcomes. This gives policymakers a way to consider how people may react to anticipated measures, not just to changes that have already occurred.
Hall’s work examined consumption and the way household spending relates to expectations about future income. Woodford’s research developed the implications of expectations for price-setting and monetary policy. Together, these lines of work helped establish a framework for thinking about how credible communication and the expected future path of interest rates can influence current decisions.
The prize does not mean that policymakers can eliminate economic shocks or predict every household and business response. The models provide a structured way to analyse policy choices, while real-world decisions remain uncertain and depend on circumstances. The Academy says the framework has helped governments and central banks respond to downturns and shocks, including energy crises and sudden shifts in consumption.
A separate economic sciences award
The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel is presented alongside the Nobel awards, but it was established later by Sweden’s central bank rather than included among Alfred Nobel’s original five prizes. The 2026 announcement was the final prize decision in this year’s award cycle.
Hall, born in 1943, earned his doctorate at the Massachusetts Institute of Technology in 1967. Woodford, born in 1955, earned his doctorate there in 1983. Both continue as professors at their respective universities.
