Americans Robert Hall and Michael Woodford win the Nobel Prize in economics

The final Nobel Prize of 2026 went on Monday to two American economists whose work reshaped how governments and central banks steady their economies.

Robert E. Hall, 83, a professor at Stanford University, and Michael Woodford, a professor at Columbia University born in Chicopee, Massachusetts in 1955, won for what the Royal Swedish Academy of Sciences called the microeconomic foundations of macroeconomic stabilisation. The prize is worth 12 million Swedish crowns, about $1.2 million, split evenly between them.

Hall and Woodford worked separately to rebuild the models policymakers use to fight recessions and tame inflation. Rather than leaning on statistical links between big aggregates like inflation, production and consumption, they grounded their models in microeconomics: how individual households and businesses actually make decisions.

The central insight is that people look ahead. Households and firms form expectations about the future when they decide how much to spend, save or charge, which means a central bank or government can move the economy in the right direction by clearly communicating its plans for interest rates, spending and taxes.

The laureates have helped us smooth out the economy's peaks and troughs, the academy said, adding that their models have been extremely helpful in dealing with the economic downturns that have affected us. Committee chair John Hassler said the work gave the world a stable theoretical foundation for the models now used by central banks and governments everywhere, leaving policymakers better equipped to handle shocks such as energy crises or sudden changes in household spending.

Hall was born in Palo Alto, California in 1943.

Last year's winners, Joel Mokyr, Philippe Aghion and Peter Howitt, were honored for work on creative destruction and how new technology lifts growth and living standards. Only three women have ever won the economics prize, most recently Claudia Goldin in 2023.