Robert Lucas Jr.

Heterodox

Robert Emerson Lucas Jr. born September 15, 1937 is an American economist at the University of Chicago, where he is currently a John Dewey Distinguished benefit Professor Emeritus in Economics together with the College. Widely regarded as the central figure in the developing of the new classical approach to macroeconomics, he received the Nobel Prize in Economics in 1995 "for having developed as well as applied the hypothesis of rational expectations, and thereby having transformed macroeconomic analysis and deepened our understanding of economic policy". He has been characterized by N. Gregory Mankiw as "the near influential macroeconomist of the last quarter of the 20th century." As of 2020, he ranks as the 11th nearly cited economist in the world.

Contributions

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

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 relation of microeconomic models while noting that aggregation in the theoretical sense may not be possible within a condition model. He developed the "Lucas critique" of economic policymaking, which holds that relationships thatto develope in the economy, such as an obvious relationship between inflation and unemployment, could change in response to reorient in economic policy. That led to the developing of new classical macroeconomics and the drive towards microeconomic foundations for macroeconomic theory.

Lucas 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 non 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 filed the intellectual foundation for the understanding of deviations from the law of one price based on the irrationality of investors.

In 2003, he stated, approximately 5 years previously the Great Recession, that the "central problem of depression-prevention has been solved, for any practical purposes, and has in fact been solved for many decades."

He also proposed the Lucas Wedge which tries to show how much higher GDP would be in the presence of proper policy.