Two economists win Nobel for showing how policy can steady economies

The 2026 economics prize carries 12 million Swedish kronor, about $1.2 million. This year, it went to two US economists whose work helps explain how policy can steady an economy. The Royal Swedish Academy of Sciences named Stanford professor Robert E. Hall and Columbia professor Michael Woodford as winners on Monday. The prize recognizes their work on how big-picture economic models can be built from choices made by people and businesses. ^1,2

Those choices became central after the oil crises of the 1970s exposed weaknesses in older economic models. Many countries faced high inflation alongside weak growth and rising unemployment, and the usual tools for judging when to act seemed less reliable. Hall and Woodford built models that look beyond broad links between measures such as inflation, production and consumption. They focused on how households and businesses decide what to spend, save, invest and charge, including what they expect to happen next. ^1,5

Those future expectations help explain why the work matters beyond universities. If people and firms respond to what they think is coming, announcements from governments and central banks can shape their decisions before a policy takes full effect. The academy says the laureates’ models now guide governments and central banks around the world. The models help them respond to downturns and shocks such as energy crises or sudden changes in household spending. The prize recognizes a framework for action, not a promise that policymakers can prevent every slump. ^1,9

Those models also put policy choices in sharper focus. Governments can adjust spending and taxes, while central banks can change interest rates to influence activity. Hall, born in 1943, teaches at Stanford; Woodford, born in 1955, teaches at Columbia. Sweden’s central bank created the economics award in 1968, rather than including it in Alfred Nobel’s original will, though it follows the Nobel selection process. The laureates are due to receive their prizes on December 10, the date the Nobel awards are presented. ^2,5