Nobel laureate Hall co-wrote the user cost of capital framework

Robert Hall and Michael Woodford won the 2026 Nobel Memorial Prize in Economic Sciences for work on the microeconomic foundations of macroeconomic stabilisation, the Tax Foundation said in a post published Oct. 21. The post gives no specific announcement date.

In a 1967 paper with Dale Jorgenson, Hall helped establish the user cost of capital, the Tax Foundation writes: a business invests when the expected return clears the combined cost of depreciation, financing and taxes. Delaying depreciation deductions raises the cost of investing by raising the cost of capital, while immediate expensing removes the penalty that inflation and the time value of money impose on a marginal investment. For an allocator, that arithmetic underpins any after-tax return assumption a manager presents, and it can be checked.

The check is narrow: which depreciation treatment and which tax rate produced the number, and what happens to the number if either changes. A strategy whose returns depend on capital spending—private capital and real assets are the obvious cases—clears a hurdle set by depreciation schedules, financing costs and the tax rate, and those move with policy rather than with demand. A return assumption that arrives without them leaves the tax line unexamined.