Robert Hall

And behind that shift lies a development in economic science, and that development was recognized by The Royal Swedish Academy this past week.

On Monday, the Nobel Prize for Economics was awarded to two Americans, Michael Woodford of Columbia and Robert Hall of Stanford, for, quote, "microeconomic foundations of macroeconomic stabilization."

Robert E.

Hall and Michael Woodford's research has helped governments and central banks make better managed periods of economic boom and recession.

So let me just try to give some intuition on what's going on.

So Robert Hall, one of his big contributions is, you'll see it described as, oh, he took Milton Friedman's permanent income hypothesis and showed that consumption was a martingale or a random walk, you might see people say.

All right, so let me just give a little bit of the background on what's going on with those claims.

So in the, let's say fifties and sixties, that was the heyday of what you might call hydraulic Keynesianism.

So that's the idea.

So that was Friedman's permanent income hypothesis.

So then Robert Hall piggybacks on that and was saying even like the Chicago School free market types who were then trying to do more sophisticated and they thought more micro-founded statistical analyses to predict like current consumption spending, they were doing stuff like, oh, rather than just doing it as a crude thing of what, what percentage, you know, what's your current income, and then trying to come up with the ratios to say, you know, what percentage of that do you consume? They were doing more th- things like looking at past income trends and then trying to say, "Okay, so here, like we're trying to like come up with a proxy for how are households now estimating their future income," 'cause strictly speaking, that's what they should be doing right now when they're deciding how much to consume that really bygones are bygones.

That should really be just a function of what do they think their future income streams are gonna be, and then that should guide what they do today.

Um, I'm tempted to read this slide, uh, and, and make fun of a language I don't understand, but I guess I won't.

Um, the Swedes gave the prize this year to Robert E. Hall-

That first one, I thought I was having a stroke.

Right? [laughs]

Two Americans are sharing the Nobel Prize for economics.

Robert Hall, who's affiliated with Stanford, and Michael Woodford with Columbia University honored for their economic models, helping governments deal with issues like inflation or an energy crisis.

President Trump says he's considering helping Saudi Arabia battle Houthi militants after weekend bombings at the airport in Riyadh killed fourteen people.

Houthi attacks on the international airport serving Saudi Arabia's capital are causing chaos in the kingdom.

This year's co-winners of the Nobel Memorial Prize in Economics helped put that answer together.

Robert Hall, whose paper I linked earlier, developed a new consumption function based on optimizing forward-looking consumers.

Michael Woodford used a version of Hall's consumption equation and added equations for firms and interest rates.

Those three equations are included in the written version of this article, RE produced from NobelPrize.org.

Zigs and zags.

It's easy for Austrian economists to take potshots at the mainstream, so let me soften my critique of new Keynesianism with this.

Robert Hall and Michael Woodford certainly deserve the Nobel Memorial Prize.

Their work has had a substantial impact on the way governments and central banks view their role in stabilizing the macroeconomy.

And one of the articles you have posted here is flat tax scholar wins Nobel Prize.

Now, I am familiar with Robert Hall, and he was one of the two that were actually honored to receive the Nobel Prize in economics.

And I'm, first of all, shocked that some of the officials in Stockholm actually did that.

But more importantly, I just think it shows that some of these scholars Very conservative, very reasonable, common sense kinds of ideas are reaching a level at which one of those individuals wins the Nobel Prize.

I need to tax us more.

Most of them are saying, and a lot of them are saying, especially around April, this tax code is entirely too complex.

And I just think it's worth mentioning that Robert Hall, who we know of, actually won the Nobel Prize.

So congratulations.

How should people feel about high gas prices? And we were recently reminded of the importance of the Fed's role in setting expectations like this.

The Nobel Memorial Prize in Economics went to Robert Hall and Michael Woodford for work showing what households and businesses expect is a big part of what holds an economy steady.

Shaping those expectations is a big part of setting policy.

Fed Chair Warsh has put aside forward guidance, one of the tools his predecessors used to steer those expectations.