Nobel economics prize goes to Hall, Woodford

Robert Hall and Michael Woodford were awarded the Nobel economics prize on Monday for their work on stabilizing disruptive economic fluctuations through monetary and fiscal policy. The Royal Swedish Academy of Sciences explained that since John Maynard Keynes formulated his theories almost a century ago, traditional "stabilization" policies had failed to effectively manage recessions and crises.

Hall, 83, a professor at Stanford University, and Woodford, 55, a professor at Columbia University, both independently began exploring new models. Their models were built on a microeconomic foundation, focusing on how individual households and businesses collectively affect the economy through their actions. A key aspect of their work is understanding that households are forward-looking when making decisions about spending or saving, which means government and central bank communication can influence people's views of the future.

Their work has provided a stable theoretical foundation for models now used by central banks and governments worldwide. Woodford, who received the news via phone, described the honor as "elating" and emphasized that his work was not motivated by a specific political agenda. Instead, it aimed to improve the discussion of economic policy and contribute to public understanding.

The Nobel economics prize was created through a donation from the Swedish central bank in 1968 and is the only Nobel not among the original five. The other Nobel Prizes in Chemistry, Physics, and Medicine were awarded to Frenchman Henri Kagan, Kenso Soai of Japan, Belgian Francis Halzen, and American Karl Deisseroth, Peter Hegemann, and Georg Nagel, respectively.