Robert Emerson Lucas Jr. (September 15, 1937 – May 15, 2023) was an American economist at the

University of Chicago The University of Chicago (UChicago, Chicago, or UChi) is a Private university, private research university in Chicago, Illinois, United States. Its main campus is in the Hyde Park, Chicago, Hyde Park neighborhood on Chicago's South Side, Chic ...

. Widely regarded as the central figure in the development of the new classical approach to macroeconomics, he received the

Nobel Memorial Prize in Economic Sciences The Nobel Memorial Prize in Economic Sciences, officially the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (), commonly referred to as the Nobel Prize in Economics(), is an award in the field of economic sciences adminis ...

in 1995 "for having developed and applied the hypothesis of

rational expectations Rational expectations is an economic theory that seeks to infer the macroeconomic consequences of individuals' decisions based on all available knowledge. It assumes that individuals' actions are based on the best available economic theory and info ...

, and thereby having transformed macroeconomic analysis and deepened our understanding of economic policy".

N. Gregory Mankiw Nicholas Gregory Mankiw ( ; born February 3, 1958) is an American macroeconomist who is currently the Robert M. Beren Professor of Economics at Harvard University. Mankiw is best known in academia for his work on New Keynesian economics. Mank ...

characterized him as "the most influential macroeconomist of the last quarter of the 20th century". In 2020, he ranked as the 10th most cited economist in the world.

Early life and education

Lucas was born on September 15, 1937, in

Yakima, Washington Yakima ( or ) is a city in and the county seat of Yakima County, Washington, United States, and the state's 11th most populous city. As of the 2020 census, the city had a total population of 96,968 and a metropolitan population of 256,728. The ...

, as the eldest child of Robert Emerson Lucas and Jane Templeton Lucas. His parents ran an ice creamery in Yakima. After the business failed during the

Great Depression The Great Depression was a severe global economic downturn from 1929 to 1939. The period was characterized by high rates of unemployment and poverty, drastic reductions in industrial production and international trade, and widespread bank and ...

, the family moved to Seattle. His mother worked as a fashion designer and his father worked at a shipbuilding yard and later worked as a welder with a refrigeration company. Lucas received his BA in history in 1959 from the

. Lucas attended the

University of California, Berkeley The University of California, Berkeley (UC Berkeley, Berkeley, Cal, or California), is a Public university, public Land-grant university, land-grant research university in Berkeley, California, United States. Founded in 1868 and named after t ...

, as a first-year graduate student, but he left Berkeley due to financial reasons and returned to Chicago in 1960, where he earned a PhD in economics in 1964. His dissertation, ''Substitution Between Labor and Capital in U.S. Manufacturing: 1929–1958'', was written under the supervision of H. Gregg Lewis and

Dale Jorgenson Dale Weldeau Jorgenson (May 7, 1933 – June 8, 2022) was an American economist who served as the Samuel W. Morris University Professor at Harvard University. An influential econometric scholar, he was famed for his work on the relationship b ...

. Lucas studied economics for his PhD on "quasi-

Marxist Marxism is a political philosophy and method of socioeconomic analysis. It uses a dialectical and materialist interpretation of historical development, better known as historical materialism, to analyse class relations, social conflic ...

" 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.

Career

Following his graduation, Lucas taught at the

Graduate School of Industrial Administration The Tepper School of Business is the business school of Carnegie Mellon University. It is located in the university's campus in Pittsburgh, Pennsylvania. The school offers degrees from the undergraduate through doctoral levels, in addition to ...

(now

Tepper School of Business The Tepper School of Business is the business school of Carnegie Mellon University. It is located in the university's campus in Pittsburgh, Pennsylvania. The school offers degrees from the undergraduate through doctoral levels, in addition to ...

) at

Carnegie Mellon University Carnegie Mellon University (CMU) is a private research university in Pittsburgh, Pennsylvania, United States. The institution was established in 1900 by Andrew Carnegie as the Carnegie Technical Schools. In 1912, it became the Carnegie Institu ...

until 1975, when he returned to the

. Lucas was elected to the

American Academy of Arts and Sciences The American Academy of Arts and Sciences (The Academy) is one of the oldest learned societies in the United States. It was founded in 1780 during the American Revolution by John Adams, John Hancock, James Bowdoin, Andrew Oliver, and other ...

in 1980, a

Guggenheim Fellowship Guggenheim Fellowships are Grant (money), grants that have been awarded annually since by the John Simon Guggenheim Memorial Foundation, endowed by the late Simon Guggenheim, Simon and Olga Hirsh Guggenheim. These awards are bestowed upon indiv ...

and the

National Academy of Sciences The National Academy of Sciences (NAS) is a United States nonprofit, NGO, non-governmental organization. NAS is part of the National Academies of Sciences, Engineering, and Medicine, along with the National Academy of Engineering (NAE) and the ...

in 1981, and the

American Philosophical Society The American Philosophical Society (APS) is an American scholarly organization and learned society founded in 1743 in Philadelphia that promotes knowledge in the humanities and natural sciences through research, professional meetings, publicat ...

in 1997. A collection of his papers is housed at the Rubenstein Library at

Duke University Duke University is a Private university, private research university in Durham, North Carolina, United States. Founded by Methodists and Quakers in the present-day city of Trinity, North Carolina, Trinity in 1838, the school moved to Durham in 1 ...

. Lucas was awarded the

in 1995. The citation noted that the prize was "for having developed and applied the hypothesis of rational expectations, and thereby having transformed macroeconomic analysis and deepened our understanding of economic policy".

Research contributions

Rational expectations

Lucas is well known for his investigations into the implications of

in macroeconomic theory.

John Muth John Fraser Muth (; September 27, 1930 – October 23, 2005) was an American economist. He is "the father of the rational expectations revolution in economics", primarily due to his article "Rational Expectations and the Theory of Price Movemen ...

had published "Rational Expectations and the Theory of Price Movements" in 1961 at the same faculty in Carnegie Tech. Lucas (1972) incorporated the idea of rational expectations into a dynamic macroeconomic models. 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 theoretical foundations to

Milton Friedman Milton Friedman (; July 31, 1912 – November 16, 2006) was an American economist and statistician who received the 1976 Nobel Memorial Prize in Economic Sciences for his research on consumption analysis, monetary history and theory and ...

and

Edmund Phelps Edmund Strother Phelps (born July 26, 1933) is an American economist and the recipient of the 2006 Nobel Memorial Prize in Economic Sciences. Early in his career, he became known for his research at Yale's Cowles Foundation in the first half o ...

's view of the long-run

neutrality of money Neutrality of money is the idea that a change in the stock of money affects only nominal variables in the economy such as prices, wages, and exchange rates, with no effect on real variables, like employment, real GDP, and real consumption. Ne ...

, and provided an explanation for the then observed correlation between output and inflation, depicted by the

Phillips curve The Phillips curve is an economic model, named after Bill Phillips, that correlates reduced unemployment with increasing wages in an economy. While Phillips did not directly link employment and inflation, this was a trivial deduction from his ...

, while illustrating that the existence of this empirical relationship did not yield a possibility of a policy trade off.

Lucas critique

In 1976, Lucas challenged the foundations of macroeconomic theory (previously dominated by the

Keynesian economics Keynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomics, macroeconomic theories and Economic model, models of how aggregate demand (total spending in the economy) strongl ...

approach), arguing that a

macroeconomic model A macroeconomic model is an analytical tool designed to describe the operation of the problems of economy of a country or a region. These models are usually designed to examine the comparative statics and dynamics of aggregate quantities such a ...

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 formulated 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. The reformulation influenced the development of

new classical macroeconomics New classical macroeconomics, sometimes simply called new classical economics, is a school of thought in macroeconomics that builds its analysis entirely on a neoclassical framework. Specifically, it emphasizes the importance of foundations bas ...

and the drive towards microeconomic foundations for macroeconomic theory.

Other contributions

Lucas developed a theory of supply that suggests people can be tricked by unsystematic monetary policy; the Uzawa–Lucas model (with

Hirofumi Uzawa was a Japanese economist. Biography Uzawa was born on July 21, 1928, in Yonago, Tottori to a farming family. He attended the Tokyo First Middle School (currently the Hibiya High School) and the First Higher School, Japan (now the College of ...

) of human capital accumulation; and the "

Lucas paradox In economics, the Lucas paradox or the Lucas puzzle is the observation that capital does not flow from developed countries to developing countries despite the fact that developing countries have lower levels of capital per worker. Classical econ ...

", 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 Paul Michael Romer (born November 6, 1955) is an American economist and policy entrepreneur who is a Seidner University Professor in Finance at Boston College. Romer is best known as the former Chief Economist of the World Bank and for co- ...

heralded the birth of

endogenous growth theory Endogenous growth theory holds that economic growth is primarily the result of endogenous and not external forces. Endogenous growth theory holds that investment in human capital, innovation, and knowledge are significant contributors to economic ...

and the resurgence of research on economic growth in the late 1980s and the 1990s. Lucas also contributed foundational contributions to behavioral economics, and provided the intellectual foundation for the understanding of deviations from the

law of one price In economics, the law of one price (LOOP) states that in the absence of trade frictions (such as transport costs and tariffs), and under conditions of free competition and price flexibility (where no individual sellers or buyers have power to m ...

based on the irrationality of investors. In 2003, he stated, about five years before the

Great Recession The Great Recession was a period of market decline in economies around the world that occurred from late 2007 to mid-2009.

, that the "central problem of depression-prevention has been solved, for all practical purposes, and has in fact been solved for many decades." Lucas also proposed the

Lucas Wedge The Lucas wedge is an economic measure of how much higher the gross domestic product would have been if it grew as fast as it should have. It shows the loss from deadweight caused by poor or inefficient economic policy choices. A Lucas wedge was na ...

which tries to show how much higher GDP would be in the presence of proper policy.

Personal life

Lucas married an undergraduate classmate from the

, Rita Cohen. The couple had two sons, Stephen (born 1960) and Joseph (born 1966). Lucas and Cohen divorced in the 1980s. The divorce stipulation had a clause that entitled Cohen to half of his Nobel prize winnings if the prize were to be awarded before October 31, 1995, which ended up being the case. After his divorce from Cohen, Lucas married

Nancy Stokey Nancy Laura Stokey (born May 8, 1950) has been the Frederick Henry Prince Distinguished Service Professor of Economics at the University of Chicago since 1990 and focuses particularly on mathematical economics while recently conducting research a ...

. The couple collaborated on papers on

growth theory In economics, economic growth is an increase in the quantity and quality of the economic goods and services that a society produces. It can be measured as the increase in the inflation-adjusted output of an economy in a given year or over a p ...

public finance Public finance refers to the monetary resources available to governments and also to the study of finance within government and role of the government in the economy. Within academic settings, public finance is a widely studied subject in man ...

, and

monetary theory Monetary economics is the branch of economics that studies the different theories of money: it provides a framework for analyzing money and considers its functions (as medium of exchange, store of value, and unit of account), and it considers how ...

. Lucas died in Chicago on May 15, 2023, at the age of 85.

Bibliography

* * * * * * 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, . * * **

Notes

References

* *

External links

Robert E. Lucas Jr.'s website at University of Chicago
* includes the Prize Lecture on December 7, 1995 ''Monetary Neutrality''

Interview on

Channel 4 Channel 4 is a British free-to-air public broadcast television channel owned and operated by Channel Four Television Corporation. It is state-owned enterprise, publicly owned but, unlike the BBC, it receives no public funding and is funded en ...

Chicago Economics on Trial
*

{{DEFAULTSORT:Lucas, Robert E. Jr. 1937 births 2023 deaths Carnegie Mellon University faculty Members of the United States National Academy of Sciences American macroeconomists New classical economists 20th-century American economists 21st-century American economists Nobel laureates in Economics American Nobel laureates University of Chicago alumni University of Chicago faculty People from Yakima, Washington Fellows of the Econometric Society Presidents of the Econometric Society Presidents of the American Economic Association Fellows of the Earhart Foundation Growth economists Fellows of the American Academy of Arts and Sciences Distinguished fellows of the American Economic Association National Bureau of Economic Research Economists from Washington (state) Members of the American Philosophical Society Chicago School economists Journal of Political Economy editors