The Nobel Prize in Economics highlights individual decision-making. Scholar: The theory works and indeed stabilizes the economy.

The 2026 Nobel Prize in Economics winners Robert E. Hall (left) and Michael Woodford (right). The Royal Swedish Academy of Sciences commended the two for incorporating the decision-making of households and businesses into economic models, laying the foundation for individual economics in analyzing the central bank's policies to stabilize the economy.

The 2026 Nobel Prize in Economics was announced today, and was jointly won by American economists Hall and Woodford. Wu Daren, a professor at the Department of Economics at Central University, analyzed that in the past, general economics adopted the theory of Keynes, the "father of macroeconomics" and the British economist. However, during the oil crisis in the 1970s, it was discovered that the economic policies of Keynes' theory did not work. In particular, the United States fell into stagnant inflation. The two winners this time The main theoretical contribution of the two scholars is to put the structure of individual economics into the overall economic model, that is, the views of individual household units and enterprises on the future economy will affect current decisions. Some countries have adopted the policy suggestions of the two scholars and achieved good results, which can indeed stabilize economic development.

Wu Daren pointed out that in the past, the theory of Keynes was used when talking about general economics. Keynes’ theory has been developed for more than a century since 1920 and has its own importance. Keynes’ theory is mainly about fiscal policy and monetary policy. Fiscal policy is to boost the economy through the government increasing public expenditure, and monetary policy is to cut interest rates and increase the money supply to stimulate the economy.

Wu Daren continued, however, two oil crises in the 1970s caused severe inflation and stagnated economic growth, leading to "stagnation inflation." At that time, many countries adopted the policy recommendations of Keynesian theory, but found that Keynes's recommendations on overall economic policies seemed to be ineffective. Especially after the United States adopted Keynesian economic policies, prices remained high and the unemployment rate could not be reduced. Therefore, everyone was disappointed with the overall economic policy at that time, and it seemed that there was no way to save the economy.

Wu Daren pointed out that the so-called overall economic policy is basically to make the entire economic development process more stable. This time, the two scholars' award announcements specifically mentioned "stability policy." The purpose of the overall economic policy is to hope that the economy will not fluctuate too much. When it is overheated, the degree of inflation must be controlled to cool down. When it is downturn, it will cause recession and increase the unemployment rate.

Wu Daren explained that the variables of the Keynesian aggregate economic model include economic growth rate, average price, unemployment rate, etc., which are aggregate economic variables. In the past, aggregate economists did not discuss the decision-making issues of individual household units (households) and individual enterprises. Individual enterprises and household units belong to the category of individual economics. The two scholars who won the award this time put these factors into the aggregate economic model. Their models describe whether the behavior of individual consumers and producers will change with the economic situation.

Wu Daren pointed out that the economic model of the two award-winning scholars particularly emphasizes the individual behavior of consumers, household units, and enterprises. They pay attention to the future economic direction when these individuals make decisions. If the economy is expected to develop in an optimistic direction, consumers are more willing to consume now and are not afraid of changes in future income, and companies are more willing to invest. The focus is on the relationship between individual household units and enterprises in the future economy. Economic views will affect current decisions. The sum of current decisions is the result of the overall economy. The general economy takes into account individual influencing factors. Economic policy must take into account that "economic policy is not just about implementation, but also needs to communicate with the entire society." Whether consumers or manufacturers have optimistic expectations for the future, they will now take actions that have positive economic development under the expectation mentality.

Wu Daren pointed out that some countries have now adopted the policy suggestions of the two scholars and have achieved good results, which can indeed stabilize economic development and prevent it from overheating or overcooling. For Taiwan, relevant theories can also be included when formulating economic policies in the future.