Beyond the obvious: Anyone who expects stress will consume less

Daniel Stelter and economist Rüdiger Bachmann discuss what role expectations play in the world of economics and why they should be given greater consideration in politics.

People don't just make decisions based on their current situation. They also take into account what they expect for tomorrow and the future.

The two US economists Robert Hall and Michael Woodford have shown how important it is to look ahead when it comes to consumption and monetary policy. The two scientists received the 2026 Nobel Prize in Economics for their contributions to the microeconomic foundations of macroeconomic stabilization.

At first glance, their research has little to do with each other. Hall received the prize for his research on consumerism, Woodford for his work on monetary policy.

What their works have in common, however, is the importance of expectations. If people expect permanently higher incomes, they will increase their consumption at an early stage. If, on the other hand, they perceive today's increased income as unsustainable or even fear a lower income in the future as a result of today's payments, they save more instead of consuming.

With Dr. Rüdiger Bachmann, Professor of Economics at the University of Michigan, discusses with Daniel Stelter the work of the two prize winners, the significance of their models and the consequences for economic policy.

If those in charge create expectations of ever higher burdens and weaker growth prospects, investment and consumption will not return through appeals for optimism. At the same time, a monetary policy that comes under the financing pressure of states risks losing its credibility.

What is required is a resilient course towards more growth and sustainable government finances, not just the next spending program, because that will only lead in the wrong direction.