Michael Woodford, AB’77, a University of Chicago alum and former faculty member, won a share of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2026 for his work developing new frameworks to address fluctuations in the economy.

During the announcement on Oct. 12, the Royal Swedish Academy of Sciences cited Woodford and Prof. Robert E. Hall of Stanford University for their research exploring the “microeconomic foundations of macroeconomic stabilisation.” Their paradigm-shifting model centers the everyday decisions of households and businesses in policies that aim to smooth out economic peaks and valleys—an approach now used globally.

“It’s a tremendous honor,” Woodford said during his Nobel news conference. “It’s a surprise, but I’m feeling very good about it.”

A graduate of the College, Woodford was an assistant professor in UChicago’s Graduate School of Business (now the Booth School of Business) from 1986-89 before becoming a member of the Department of Economics from 1989-95. Currently the John Bates Clark Professor of Political Economy at Columbia University, Woodford is the 102nd scholar associated with the University—and the 14th College alum—to receive a Nobel Prize.

“Michael Woodford holds a special place in the University of Chicago community as both an alumnus of the College and a former faculty member,” said President Paul Alivisatos. “I am delighted that the Nobel Committee has recognized him for his work in addressing economic shocks, research that has proved invaluable to policymakers around the world.”

‘A new framework from the ground up’

As a macroeconomist, Woodford focuses his research on how monetary policy meets real-world decision-making, especially in an economy in constant flux.

To many economists, the economy is like driving on the expressway—it’s important to keep things moving when traffic turns sluggish, but also to hit the brakes when things start to get out of control. Recessions can lead to unemployment; inflation can threaten economic stability. Meanwhile, major world events such as war or natural disasters can upend the global economy.

Banks and governments try to modulate these booms and busts. During the Great Depression, John Maynard Keynes proposed that government intervention, such as cutting interest rates to stimulate the economy, was the best way to deal with these swings. However, many believed the devastating oil crisis of the 1970s—and the stagflation that followed—proved the Keynesian model could do more harm than good.

Woodford and Hall’s research “built a new framework from the ground up,” said the Nobel committee. They posited that understanding how individual businesses and households make decisions is key to stabilizing the economy.

In 2003, Woodford published his groundbreaking Interest and Prices: Foundations of a Theory of Monetary Policy, which analyzed how businesses set prices. Woodford emphasized that public understanding of policy and future uncertainty was a critical element of the model.

“The people who are in the markets and making decisions about spending … their expectations and their understanding of what policy is likely to be like in the future are actually crucial to the effects of policy,” Woodford said.

‘A standout colleague’

As a student in the College, Woodford majored in Ideas & Methods before attending Yale Law School and then pursuing a Ph.D. in economics at the Massachusetts Institute of Technology. Woodford says his non-traditional path to economics gave him an “outsider’s eye” that allowed him to challenge long-held ideas in the field.

Woodford’s former UChicago colleagues welcomed news of his Nobel honor.

Former colleague Anil Kashyap, the Stevens Distinguished Service Professor of Economics and Finance at Chicago Booth, called him a “spectacular colleague” who was quintessentially “curious, generous and brilliant.”

“The prize for Hall and Woodford is being celebrated by macroeconomists everywhere,” said Kashyap. “These are two giants in the field who have done groundbreaking work.”

“Mike Woodford did the (almost) impossible. He developed a very rigorous theory that became quantitative and changed the way that central banks do monetary policy,” said Nobel laureate Douglas W. Diamond, the Merton H. Miller Distinguished Service Professor of Finance. “I miss his days at the (then) GSB. He was a standout colleague.”

“Mike is a brilliant economist who has made a variety of very interesting contributions. I have known him for a long time, including when he was one of my favorite colleagues at the University of Chicago,” said fellow Nobel laureate Lars Peter Hansen, the David Rockefeller Distinguished Service Professor in Economics, Statistics and the Booth School of Business. “I was happy to see some of his valuable research recognized with a Nobel Prize.”

Before receiving the Nobel, Woodford was named both a MacArthur Fellow and a Guggenheim Fellow among his many accolades.

Woodford joins the more than 35 economists affiliated with UChicago to be named Nobel laureates, including eight current UChicago faculty members: Prof. James Robinson (who won in 2024), Prof. Douglas Diamond (2022), Prof. Michael Kremer (2019), Prof. Richard Thaler (2017), Profs. Eugene Fama and Lars Hansen (2013), Prof. Roger Myerson (2007) and Prof. James Heckman (2000).