The Nobel Prize in Economics was awarded to Americans Michael Woodford and Robert Hall for their studies on the "microeconomic foundations of macroeconomic stabilization."
Woodford and Hall “have developed new macroeconomic models that have improved our ability to implement effective stabilization policies,” the Nobel committee declared.
Hall was honored for a 1978 paper on how consumers prefer consumption to remain stable, while Woodford went on to develop the so-called modern Keynesian model, which has since proved highly influential among global policymakers even today.
"The work of the laureates has provided us with a solid theoretical foundation for the models now used by central banks and governments around the world," said John Hassler, chair of the prize committee, in a statement. "Thanks to them, we are better equipped to deal with economic shocks, such as energy crises or sudden changes in household consumption."
During the oil crises of the 1970s, existing Keynesian models, long used to determine when and how to implement measures to address recessions or other economic fluctuations, no longer worked. This prompted Hall and Woodford to develop new tools to understand which policy responses would be most effective. "Rather than basing their models on statistical links between macroeconomic variables, such as inflation, production, and consumption, they chose to build them on a microeconomic foundation," the academic panel said.
"This includes an understanding of how the aggregate of individual households and businesses influences the economy through their actions." The Nobel Prize in Economic Sciences was established by the Sveriges Riksbank, Sweden's central bank, in 1968 and is awarded annually alongside the Nobel Prizes in Physics, Chemistry, Medicine, Literature, and Peace. Like the other Nobel Prizes, the Prize in Economics consists of a diploma, a gold medal, and a cheque for 12 million Swedish kronor (approximately €1.06 million). The laureates will receive their awards during official ceremonies on December 10, the anniversary of the death in 1896 of scientist Alfred Nobel, who created the prizes in his will.
(Unioneonline)
