The 2026 Nobel Prize in Economic Sciences was awarded to Robert E. Hall and Michael Woodford, theĀ Royal Swedish Academy of Sciences in Stockholm announced on Monday.
The pair got the Nobel for theirĀ work in microeconomic foundations of stabilization policy, allowing for theĀ development ofĀ economic models that help governments and central banks respond more effectively to booms and recessions.
Hall is affiliated with Stanford University in California, and Woodford with Columbia University in New York.
“It’s a tremendous honor, it’s a surprise,” Woodford said, addressingĀ the committee by phoneĀ from New York on Monday.
Why did Hall and Woodford win the Nobel Prize?Ā
The pair of US scientists were awarded for looking toward microeconomic indicators to inform macroeconomic stabilization policies.
They have based their economic models on a microeconomic foundation, breaking with the longstanding Keynesian models, developed byĀ economist John Maynard Keynes almost a century ago.
The Royal Swedish Academy of Sciences argued that decades of applying the Keynesian models showed their limitations ā€“ including in failing to curb unemployment and instead raise inflation.Ā
“The West experienced a decade of lowĀ growth, high unemployment and high inflation. Many people believed that stabilization policy had done more harm than good and that it should be retired,” the academy said in its press release.
Hall and Woodford’s model instead demonstrated how the total mass of individual households and businesses affect the economy through their actions.
“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. 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,” said John Hassler, Chair of the Committee for the Prize in Economic Sciences.
What else to know about the Nobel Economics prize?
The economics prize is formally known as the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel.
Last year’s prize was awarded to three business innovation researchers who explained how new products and inventions promote economic growth and human welfare, even as they leave older companies behind.
The Sveriges Riksbank established it in 1968 as a memorial to Nobel, the 19th-century Swedish businessman and chemist who invented dynamite and established the five Nobel Prizes.
Since the economics prize was not one of the five original Nobel Prizes established by Nobel in his will, some argue that it is not technically not a Nobel Prize.
Nevertheless, it is always presented together with the others on December 10, the anniversary of Nobel’s death in 1896.
Nobel honors were announced last week in medicine, physics, chemistry, literature and peace.
This year’s prize money is 12 million Swedish kronor (about $1.2 million or ā‚¬1.07 million), whether for an individual, small group of laureates or organization.
Edited by: Jenipher Camino Gonzalez
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