Robert E. Hall and Michael Woodford received the economics prize for work connecting households’ and businesses’ decisions to economy-wide fluctuations. Their models describe how saving, pricing and expectations shape stabilisation policy. The Royal Swedish Academy of Sciences said the research changed the theoretical foundations used by governments and central banks. The two economists share 12 million Swedish kronor equally.
Robert E. Hall and Michael Woodford received the economics prize on 12 October for research on the microeconomic foundations of macroeconomic stabilisation. The Royal Swedish Academy of Sciences recognised their work linking individual household and business decisions to fluctuations across an economy. Hall works at Stanford University while Woodford works at Columbia University.[1], [2]
The academy describes a shift from models based on statistical links between aggregate inflation, production and consumption towards models built around how households and firms act. Saving decisions and product pricing sit at the centre of that approach. Because people and businesses consider the future, government and central-bank communication can influence expectations and decisions made today.[1]
The historical challenge was the oil crises of the 1970s, when low growth, high unemployment and high inflation appeared together. The academy says the newer models helped restore a theoretical basis for stabilisation policy. Committee chair John Hassler identified energy crises and sudden changes in household consumption as examples of shocks policymakers can better understand through these models.[1]
Hall was born in 1943 and received his doctorate from the Massachusetts Institute of Technology in 1967. Woodford, born in 1955, earned his doctorate there in 1983. The award totals 12 million Swedish kronor, shared equally between them. The academy attributes the recognition to their scientific contribution to policy modelling and to models now used by governments and central banks.[1]
