"Americans Hall, Woodford win Nobel prize for work on stabilising economies"

From Reuters, October 12:

• Winners' work leaves policymakers better equipped to deal with shocks, says Nobel committee chair
• Woodford says new framework helped policy after global financial crisis
• Hall and Woodford's work underpins concepts including sticky inflation and output gap 

US academics Robert Hall and Michael Woodford won the 2026 Nobel economics prize on Monday ‌for decades of work developing ground-up models currently used by central banks and finance ministries across the world to stabilise economies.

 

"With them, we are better equipped to deal with shocks in the economy, such as energy crises or sudden changes in how much households consume," John Hassler, Chair of the Committee for the Prize ​in Economic Sciences, said in a statement.

 

The prestigious award, formally known as the Sveriges Riksbank Prize in Economic Sciences in ​Memory of Alfred Nobel, is the final prize to be given out this year and is worth 12 ⁠million Swedish crowns ($1.2 million).

 

One of the laureates' key insights is that economies could only be kept on an even keel by taking ​into account the millions of decisions made at a micro-level by households and businesses, rather than by using top-down theories of how economies work.

 

"...Authorities ​shouldn't view stabilization of the economy as an exercise that is simply conducted by people pulling levers to control the economy independently of what people in the economy understand about this," Columbia University's Woodford, 70, told a news conference.

 

In contrast to the oil shocks of the 1970s, when central banks struggled to combat ​sky-high inflation, Woodford said the new framework was useful during the global financial crisis of the late-2000s to bolster traditional tools of monetary ​policy.

 

"Making more explicit statements about the likely future path of interest rate policy, as opposed to relying on simply being able to cut interest rates ‌further immediately, ⁠that was an important part of the policy response in the years from 2009 onward," he said....

....MUCH MORE

Over the years we've been more intrigued by Woodford than by Hall.

Professor Hall has only a couple brief  appearances on the blog, one was a mention in passing by John Cochrane. He's a member of the MIT economics mafia (ditto Woodford) though not pictured on the handy chart. (PhD advisor Robert Solow)

Woodford on the other hand...we once introduced (October 2014) using the term of art favored by the cognoscenti: 

Minneapolis Fed: "Interview with Michael Woodford"
One of the big dogs.

It seems everyone wanted to talk to him. Here he is a year earlier:

Goldman Sachs' Allison Nathan Interview with Economist Michael Woodford

And a few months prior to that. April 2013"

Let's Just Proclaim Jubilee: "Quantitative easing should be used to write off government debt"

From the Telegraph:
Helicopter QE will never be reversed

Readers of the Daily Telegraph were right all along. Quantitative easing will never be reversed. It is not liquidity management as claimed so vehemently at the outset. It really is the same as printing money. 

Columbia Professor Michael Woodford, the world's most closely followed monetary theorist, says it is time to come clean and state openly that bond purchases are forever, and the sooner people understand this the better.

"All this talk of exit strategies is deeply negative," he told a London Business School seminar on the merits of Helicopter money, or "overt monetary financing".

He said the Bank of Japan made the mistake of reversing all its money creation from 2001 to 2006 once it thought the economy was safely out of the woods. But Japan crashed back into deeper deflation as soon the Lehman crisis hit.

"If we are going to scare the horses, let's scare them properly. Let's go further and eliminate government debt on the bloated balance sheet of central banks," he said. This could done with a flick of the fingers. The debt would vanish. 

Lord Turner, head of the now defunct Financial Services Authority, made the point more delicately. "We must tell people that if necessary, QE will turn out to be permanent."

The write-off should cover "previous fiscal deficits", the stock of public debt. It should be "post-facto monetary finance".

The policy is elastic, for Lord Turner went on to argue that central banks in the US, Japan and Europe should stand ready to finance current spending as well, if push comes to shove. At least the money would go straight into the veins of the economy, rather than leaking out into asset bubbles....MORE 

There is some really dark humor in that "horses" reference, here's the story:

 Does it really matter what these affectionate people do — so long as they don’t do it in the streets and frighten the horses!

• Reply to a young actress who asserted that an older actor in a production showed too much affection for the leading man (c. 1910); as reported by Alan Dent in Mrs. Patrick Campbell, p. 78 (1961). Source

If I'm interpreting this correctly, one of the sharpest monetary theorists in the world is saying we're fucked; and might as well do the economics equivalent of "Let the good times Roll."

Oddly enough Professor Woodford holds the John Bates Clark Chair at Columbia but did not win the Clark Medal.
He did however win a MacArthur 'Genius Grant'.

That's all I know. For more here's 

https://www.nobelprize.org/prizes/economic-sciences/2026/summary/