The Nobel Prize in Economics of 2026.

This year's Nobel Prize in Economics was awarded to two researchers whose work contributed to the microeconomic foundations of macroeconomic stabilization: Robert Hall and Michael Woodford. Simply put, it's about understanding how the decisions of households and businesses produce economic fluctuations and to what extent economic policy can dampen them.

Sometimes, the economy rises and falls in response to external shocks, such as the COVID-19 pandemic. But fluctuations occur even when a clear and significant external shock is not evident. Why do we have periods of expansion—in which employment and production grow—and periods of recession, with lower activity and generally higher unemployment? And what can economic policy do to mitigate these oscillations?

In the late 1970s, when I began studying Economics, there was still debate between Keynesians, followers of John Maynard Keynes, and monetarists, mainly associated with Milton Friedman. To simplify considerably, Keynes emphasized the importance of aggregate demand and, in particular, the instability of private investment. When this demand falls, increased public spending can help sustain economic activity and prevent a recession from worsening.

Read the full Expresso article.
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Luís Cabral is Paganelli-Bull Professor of Economics and International Business at NYU Stern.