The Nobel Memorial Prize in Economic Sciences was awarded Monday to Robert E. Hall of Stanford University and Michael Woodford of Columbia University for their research on microeconomic foundations of macroeconomic stabilization. The Royal Swedish Academy of Sciences honored their work, which has helped guide fiscal and monetary policies that reduce economic volatility, leading to milder booms and busts. They will share 12 million Swedish kronor (about $1.2 million).
Hall focused on consumer demand and spending, while Woodford analyzed the supply side, particularly firms' price-setting behavior. Their bottom-up models — incorporating how households and firms form expectations about the future — revitalized stabilization policy pioneered by John Maynard Keynes. This framework proved crucial after the 2008 financial crisis, when central banks used forward guidance to shape expectations and stabilize economies.
Woodford said the prize was a "tremendous honor" and emphasized that understanding individual decision-making is essential for effective policy communication. Last year's prize went to Joel Mokyr, Philippe Aghion, and Peter Howitt for research on innovation-driven growth.
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