The Royal Swedish Academy of Sciences, acting on the recommendation of its Economic Sciences Prize Committee, has honored the godfather of forward guidance just as central bankers are putting his most famous policy prescription into retirement.
On Monday, Columbia University economist Michael Woodford shared the economics prize with Stanford University’s Robert Hall for their work on the foundations of economic stabilization. Both have made important contributions to economics and are inarguably deserving of the high honor. Woodford helped develop the New Keynesian framework that became the common language of academic macroeconomics and central banking.
Coming five months after Kevin Warsh took over the Federal Reserve and began abandoning forward guidance, it’s hard not to see the decision to give the award to the godfather of forward guidance as an implicit rebuke to the new chairman. The committee has bestowed the profession’s highest honor on the man whose work inspired the policy Warsh is officially laying aside. Its members can hardly have missed the contrast.
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