Robert Lucas, Jr.

Robert Emerson Lucas, Jr.
Born	September 15, 1937 Yakima, Washington, USA
Nationality	United States
Institution	Carnegie Mellon University University of Chicago
Field	Macroeconomics
School or tradition	New classical macroeconomics
Alma mater	University of Chicago
Influences	Arnold Harberger H. Gregg Lewis Milton Friedman John Muth
Influenced	Thomas J. Sargent Robert Barro Neil Wallace Lawrence Summers Richard Thaler William A. Barnett Paul Romer
Contributions	Rational expectations Lucas critique Behavioral Economics
Awards	Nobel Memorial Prize in Economic Sciences (1995)
Information at IDEAS / RePEc

Robert Emerson Lucas, Jr. (born September 15, 1937) is an American economist at the University of Chicago. Widely regarded as the central figure in the development of the new classical approach to macroeconomics,^[1] he received the Nobel Memorial Prize in Economic Sciences in 1995. He has been characterized by N. Gregory Mankiw as "the most influential macroeconomist of the last quarter of the 20th century."^[2]

Biography

He was born in 1937 in Yakima, Washington, and was the oldest child of Robert Emerson Lucas and Jane Templeton Lucas.

He received his B.A. in History in 1959 and Ph.D. in Economics in 1964, both from the University of Chicago. His dissertation “Substitution between Labor and Capital in U.S. Manufacturing: 1929–1958” was written under supervision of Arnold Harberger and H. Gregg Lewis.^[3] Lucas studied economics for his Ph.D. on "quasi-Marxist" grounds. He believed that economics was the true driver of history, and so he planned to immerse himself fully in economics and then return to the history department.^[4]

Following his graduation, Lucas taught at the Graduate School of Industrial Administration (now Tepper School of Business) at Carnegie Mellon University until 1975, when he returned to the University of Chicago.^[5]

His ex-wife, Rita Lucas, upon their divorce in 1988, had a clause placed in their divorce settlement that she would receive half of any Nobel Prize won by Lucas in the next seven years. When Lucas won the Nobel Prize in 1995 (falling just within the time limit), she was awarded half of the prize money.^[6] He later married Nancy Stokey. They have collaborated in papers on growth theory, public finance, and monetary theory.

Robert Lucas has two sons: Stephen Lucas and Joseph Lucas.

A collection of his papers are housed at the Rubenstein Library at Duke University.^[7]

Contributions

Rational expectations

Lucas is well known for his investigations into the implications of the assumption of rational expectations. Lucas (1972) incorporates the idea of rational expectations into a dynamic general equilibrium model. The agents in Lucas's model are rational: based on the available information, they form expectations about future prices and quantities, and based on these expectations they act to maximize their expected lifetime utility. He also provided sound theory fundamental to Milton Friedman and Edmund Phelps's view of the long-run neutrality of money, and provide an explanation of the correlation between output and inflation, depicted by the Phillips curve.

Lucas critique

Lucas (1976) challenged the foundations of macroeconomic theory (previously dominated by the Keynesian economics approach), arguing that a macroeconomic model should be built as an aggregated version of microeconomic models (while noting that aggregation in the theoretical sense may not be possible within a given model). He developed the "Lucas critique" of economic policymaking, which holds that relationships that appear to hold in the economy, such as an apparent relationship between inflation and unemployment, could change in response to changes in economic policy. This led to the development of new classical macroeconomics and the drive towards microeconomic foundations for macroeconomic theory.

Other contributions

He developed a theory of supply that suggests people can be tricked by unsystematic monetary policy; the Uzawa–Lucas model (with Hirofumi Uzawa) of human capital accumulation; and the "Lucas paradox", which considers why more capital does not flow from developed countries to developing countries. Lucas (1988) is a seminal contribution in the economic development and growth literature. Lucas and Paul Romer heralded the birth of endogenous growth theory and the resurgence of research on economic growth in the late 1980s and the 1990s.

He also contributed foundational contributions to behavioral economics, and has provided the intellectual foundation that enables us to understand deviations from the law of one price based on the irrationality of investors.

In 2003, he proclaimed, about 5 years before the Great Recession, that the “central problem of depression-prevention has been solved, for all practical purposes, and has in fact been solved for many decades.”^[8]

Bibliography

• Lucas, Robert (1972). "Expectations and the Neutrality of Money". Journal of Economic Theory 4 (2): 103–124. doi:10.1016/0022-0531(72)90142-1.
• Lucas, Robert (1976). "Econometric Policy Evaluation: A Critique". Carnegie-Rochester Conference Series on Public Policy 1: 19–46. doi:10.1016/S0167-2231(76)80003-6.
• Lucas, Robert (1988). "On the Mechanics of Economic Development". Journal of Monetary Economics 22 (1): 3–42. doi:10.1016/0304-3932(88)90168-7.
• Lucas, Robert (1990). "Why Doesn't Capital Flow from Rich to Poor Countries". American Economic Review 80: 92–96. JSTOR 2006549.
• Lucas, Robert (1981). Studies in Business-Cycle Theory. MIT Press. ISBN 0-262-62044-8.
• Lucas, Robert (1995) – "Monetary Neutrality" Prize Lecture – 1995 Nobel Prize in economics , December 7, 1995
• Stokey, Nancy; Robert Lucas; and Edward Prescott (1989), Recursive Methods in Economic Dynamics. Harvard University Press, ISBN 0-674-75096-9.
• Lucas, Robert E., Jr. 'The History and Future of Economic Growth', in The 4% Solution: Unleashing the Economic Growth America Needs, edited by Brendan Miniter. New York: Crown Business. 2012.

See also

• New classical economics
• Welfare cost of business cycles
• List of economists
• Lucas islands model

Notes

1. Snowdon, Brian; Vane, Howard R. (2005). Modern Macroeconomics: Its Origin, Development and Current State. Cheltenham: Edgar Elgar. pp. 220–223. ISBN 1-84542-208-2.
2. Mankiw, N. Gregory (September 21, 2009). "Back In Demand". Wall Street Journal.
3. Andrada, Alexandre F. S. (2014). "Understanding Robert E. Lucas Jr. His Influence and Influences". SSRN 2515932.
4. Roberts, Russ (February 5, 2007). "Lucas on Growth, Poverty and Business Cycles". EconTalk. Library of Economics and Liberty.
5. Pressman, Steven (1999). Fifty Major Economists. London: Routledge. pp. 193–197. ISBN 0-415-13481-1.
6. "Boston Globe Archive access". The Boston Globe. July 19, 2012.
7. "Robert E. Lucas Papers, 1960–2004 and undated". Rubenstein Library, Duke University.
8. "Fighting Off Depression". The New York Times. January 4, 2009.

References

• Galbács, Peter (2015). The Theory of New Classical Macroeconomics. A Positive Critique. Heidelberg/New York/Dordrecht/London: Springer. doi:10.1007/978-3-319-17578-2. ISBN 978-3-319-17578-2.
• Kasper, Sherryl. The Revival of Laissez-Faire in American Macroeconomic Theory: A Case Study of Its Pioneers (2002) ch. 7
• Associated Press (1995-10-21). "Nobel winner noble in loss; accord awards half of prize to ex-wife". Boston Globe. p. 65. Archived from the original (– ^{Scholar search}) on February 2, 2016.

External links

• Robert E. Lucas, Jr.'s website at University of Chicago
• Biography
• Robert E. Lucas, Jr. – Autobiography
• Nobel Prize Press Release
• IDEAS/RePEc
• Interview on Channel 4
• Chicago Economics on Trial
• Robert E. Lucas Jr. (1937– ). The Concise Encyclopedia of Economics. Library of Economics and Liberty (2nd ed.) (Liberty Fund). 2008.