The 2026 Nobel and the value of ideas

Robert Hall, intangible capital and the patent as a tool for value creation

Massimo Getto – Group CFO, Studio Torta

 

Why this Nobel matters to those who protect ideas

The 2026 Nobel Prize in Economics went to Robert E. Hall and Michael Woodford for the microeconomic foundations of macroeconomic stabilisation. At first glance it is a prize for central bankers and finance ministers, far removed from the world of patents and trademarks. Yet in Hall’s work there is a thread that leads straight to intellectual property.

Twenty-five years ago, Hall showed that the stock market value of American companies revealed an enormous stock of capital that balance sheets did not record: knowledge, technologies, working methods. Today that capital is the predominant part of the value of large companies. The patent is the tool that turns a part of that capital into a right: recognisable, defensible, capable of generating value.

This article describes the prize, reconstructs Hall’s contribution and draws a number of lessons from it for companies that innovate and for those who, like Studio Torta since 1879, work to protect their ideas.

The prize: models built from the bottom up

Hall and Woodford have changed the way central banks and governments decide when to stimulate or slow down the economy. According to the Royal Swedish Academy of Sciences, instead of basing their models on statistical links between variables such as inflation, output and consumption, they built them on microeconomic foundations: the choices of households and companies.

It is a response to the criticism that Robert Lucas levelled in the 1970s. The old models broke down precisely when economic policy changed, because households and companies adapted their behaviour to the new rules. By starting from how people make decisions, the models become more robust.

There are two main contributions. In a 1978 article, Hall showed that households tend to spread their consumption over time on the basis of expectations about future income. Woodford, in a 2003 book, presented a complete New Keynesian model built on these foundations, today the reference framework of central banks. Thanks to them, the committee observed, we are better equipped to deal with shocks, such as energy crises or sudden changes in household consumption.

Hall and the capital that balance sheets do not see

Hall’s contribution that concerns intellectual property is not the one  named in the prize citation, but a 2001 paper. The committee itself  noted that Hall left his mark on very different topics in macroeconomics.

In “The Stock Market and Capital Accumulation”, published in the American Economic Review, Hall starts from a simple line of reasoning. If companies invest as long as it is worthwhile, the value of their securities measures the value of the capital they own. Applied to fifty years of data on American companies, the result is clear-cut: companies had accumulated large  amountsof intangible capital, above all in the 1990s.

A year earlier, in an essay for the Brookings Institution, Hall had given this capital a name: “e-capital”, the body of technical and organisational knowledge of a company. Not the computers, he specified, but the working methods built thanks to the computers.

The example he chose has remained famous. In November 2000 Yahoo! was worth 37 billion dollars on the stock market, but it owned physical capital of barely 158 million dollars. The rest, over 99%, was made up of ideas, skills, technologies and brand.

The methodological point is important even today. Intangible capital does not appear in balance sheets or in national statistics, but the market sees it and pays for it. Hall proposed taking that judgement seriously, instead of dismissing it as a bubble.

Twenty-five years later: 92%

Later data proved Hall right. According to Ocean Tomo’s Intangible Asset Market Value Study 2025, in 1975 tangible assets accounted for 83% of the market value of S&P 500 companies. At the end of 2025 the ratio  had reversed: intangibles are worth about 92%.

The fastest transformation took place precisely in the years studied by Hall. Between 1985 and 2005 the share of intangibles rose from 32% to 79%: 47 percentage points in twenty years. The industrial revolution  took a century, while the intangibles revolution was completed within a single lifetime.

Ocean Tomo’s method is a close relative of Hall’s: intangible value is calculated as the difference between market capitalisation and the net value of tangible assets. This calls for caution, because the residual also includes expectations of growth and investor sentiment. In Europe, moreover, the phenomenon is less marked. The direction, however, is unmistakable.

There is a detail that links the data to the theme of the Nobel. Between 2020 and 2025 the share of intangibles in the S&P 500 remained stable at around 90%, despite the most aggressive monetary tightening by the Federal Reserve in forty years. The value of ideas held up even when stabilisation policy raised interest rates.

The patent protects value creation

There is a condition in Hall’s reasoning that is of direct interest to those who work in intellectual property. Stock market value measures a company’s capital only if its assets do not include a permanent monopoly rent. Intellectual property rights are the opposite: real exclusive rights, but limited in time and space.

The economic foundation has been well known since the time of Kenneth Arrow. Knowledge is a non-rival good and is hard to exclude others from using: without protection, those who invest in research cannot appropriate the fruits of their effort, and less innovation takes place than is necessary. Intellectual property rights correct this market failure.

The patent, however, does not protect an abstract idea: it protects the value that the idea creates. It is the title that enables a company to retain the returns on its investment in research, to grant licences, to attract capital, to defend a conquered market and to enhance its value in an acquisition. In Hall’s language, it is what turns part of intangible capital from a promise into an asset.

A patent lasts for a maximum of twenty years and, in exchange, the invention is published. Those who innovate obtain the time to recover their investment; the community obtains knowledge that, on expiry, becomes available to all. It is this balance that distinguishes an incentive to innovate from a rent of position.

Woodford, too, by analogy, offers a useful lesson. One of the central messages of his work is that monetary policy acts above all through expectations: a credible rule guides the decisions of households and companies today. The same applies to innovation. A company invests in research today if it expects that tomorrow its invention will be protected in a predictable and effective way.

Writing a patent is not something to be improvised

An expectation of protection, however, is credible only if the patent is strong. And a patent is worth exactly as much as the text in which it is written. The claims define the scope of protection: if they are too broad, the patent risks being invalidated for lack of novelty; if they are too narrow, a competitor circumvents the invention with a minimal variant and the value vanishes.

Writing a patent is substance. It requires a thorough understanding of the technology, often better than the inventor describes it; knowledge of the prior art; mastery of the rules and practice of patent offices; and an ability to read the client’s strategy, in order to anticipate where competitors will move in the years to come.

Many errors, moreover, cannot be corrected. After filing, no new matter can be added to the application: what was not well written at the outset remains outside the scope of protection forever. The cost of a weak text emerges when the patent is put to the test: in an opposition, in litigation, in due diligence  for an acquisition, in the negotiation of a licence.

Digital tools and artificial intelligence help with research and drafting, but they do not replace judgement. Understanding, expertise and experience are built up over years of work across different technologies and on real cases, before examiners and in court.

That is why only organisations that carry out this work with professionalism, methodology and expertise can offer real protection: multidisciplinary teams of engineers, chemists, physicists, biotechnologists and jurists, qualified attorneys, quality processes and a professional memory accumulated over time. The protection of intellectual property is not a formal obligation: it is the point at which the value of an innovation is made safe, or lost.

Two consecutive Nobels, one story

The 2026 prize is best read alongside that of 2025, awarded to Joel Mokyr, Philippe Aghion and Peter Howitt “for having explained innovation-driven economic growth”.

Aghion and Howitt built a mathematical model of the creative destruction intuited by Schumpeter: new products and processes replace old ones in a continuous cycle. Companies invest in research because those who innovate can enjoy, for a period, the fruits of their own idea, until a subsequent innovator surpasses them. It is exactly the window that a patent opens up. Aghion, however, also insists on balance: too little protection discourages innovation, too much holds back competition.

Mokyr, as a historian, showed that sustained growth requires knowledge that circulates, accumulates and is put to the test. Here too the patent has a specific role: the temporary exclusive right is granted in exchange for the publication of the invention, which becomes the basis for the next step.

Taken together, the two prizes tell a single story. Aghion and Howitt explain why companies invest to create ideas; Hall shows where the value of those ideas ends up. The 2025 committee drew from this a warning that  remains valid today as well: we must preserve the mechanisms underlying creative destruction in order to avoid falling back into stagnation. The patent system is one of those mechanisms.

What this means for companies

If the value of companies is made up mainly of ideas, the question for a board of directors becomes: how much of that value is truly protected? Four practical indications follow from Hall’s work and from today’s data.

  • Turn intangible capital into rights. The residual that the market recognises comprises knowledge, technologies and reputation. Only the part protected by patents, trademarks, designs or well-guarded trade secrets withstands imitation and challenge.
  • Measure it, even if the balance sheet does not see it. Research expenditure is largely made up of current-period expenses, and the value it generates does not appear among the assets. An up-to-date inventory of the intellectual property portfolio, with a valuation, is a tool of governance, not a formality.
  • Build a portfolio, not individual filings. As Woodford teaches for monetary policy, consistency and predictability over time matter. A protection strategy aligned with the business plan is worth more than episodic filings.
  • Use it as financial leverage.  Strong, well-valued rights can be licensed, assigned or used to access credit: intellectual property is becoming a bankable asset.

For a firm like ours, this reading confirms a raison d’être that dates back to 1879, when the Torta brothers were among the first in Italy to understand that ideas needed  protection. Our work is to turn ideas into strong, defensible rights capable of generating value.

The 2026 Nobel rewards those who taught us how to stabilise the economy. But in one of his least-cited works, Robert Hall reminded us where the value of companies has moved. Protecting it with expertise is our part of the work.

References

Latest news