Robert E. Hall and Michael Woodford have been awarded the 2026 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for their influential work on the microeconomic foundations essential to achieving macroeconomic stability. Their research underpins many modern economic models used by central banks and governments to manage economic fluctuations during booms and busts. The $1.2 million prize, equivalent to 12 million Swedish kronor, is to be shared between the two U.S.-born economists, with Hall being a professor at Stanford University and Woodford at Columbia University.

Their pioneering work addresses a key challenge that emerged during the stagflation crises of the 1970s when traditional Keynesian models, which focused on tools like interest rates and government deficits to combat recessions, started to lose effectiveness. Hall and Woodford contributed new insights by incorporating how individual households and firms’ forward-looking decisions collectively drive the economy. This approach shifted focus beyond aggregate variables like inflation or production, emphasizing expectations and future-oriented economic behavior.

The Royal Swedish Academy of Sciences highlighted how their contributions have enhanced the understanding of how communication from central banks and governments can shape public expectations and effectively steer economic policy. The new generation of economic models inspired by their work enables more precise timing of fiscal and monetary interventions, which helps to moderate economic volatility and smooth out peaks and troughs. Since the implementation of these models, policymakers have been better equipped to respond to shocks such as energy crises and sudden shifts in household consumption.

The economics prize was the final Nobel announced this year, following awards in medicine, physics, chemistry, literature, and peace. Other notable winners this year include Navanethem “Navi” Pillay, who received the Peace Prize for her efforts in promoting peace and international law, and Canadian poet Anne Carson, honored with the Literature Prize for her innovative body of work. This year's economics award underscores the continued importance of foundational economic theory in addressing real-world economic challenges.