WHO IS Robert E. Lucas Jr.
Robert Emerson Lucas, Jr. is an American economist at the University of Chicago, renowned for his prominent role in the formation of the New Classical approach to macroeconomics. He won the Nobel Prize in Economics in 1995 for developing the theory of rational expectations.
BREAKING DOWN Robert E. Lucas Jr.
Robert E. Lucas Jr. was born the eldest child of Robert Emerson Lucas Sr. and Jane Templeton Lucas in Yakima, Washington, on September 15, 1937, Lucas received a Bachelor of Arts in History from the University of Chicago in 1959. He initially pursued graduate studies at the University of California, Berkeley, before returning to Chicago for financial reasons. In 1964 he earned his Ph.D. Initially, he believed his academic life would center around history, and he only continued his economic studies after reaching the conclusion that economics is the true driving force of history. Significantly, Lucas claimed to have studied economics for his Ph.D. from a “quasi-Marxist” point of view, no small feat in the fiercely anti-Communist American culture of the early 1960s.
Lucas became a professor at the Carnegie Mellon University at the Graduate School of Industrial Administration, now the Tepper School of Business, before returning to the University of Chicago in 1975. He spent much of his academic career investigating the implications of the assumptions of the rational expectations theory. In a paper in 1972, for example, he incorporates the idea of rational expectations into a dynamic general equilibrium model. His model predicts future prices and quantities based on available information using rational agents. These expectations serve to maximize the longevity and usefulness of the predictions. He also created several theory fundamentals to the Friedman-Phelpsian theory of long-term monetary neutrality, and provided an explanation for the Phillips Curve, a model for the correlation of output and inflation.
Other contributions of Lucas’ were the Lucas Paradox, which attempted to explain why capital did not flow from developed nations to undeveloped nations at a greater rate, the Uzawa-Lucas model of human capital accumulation, along with Japanese economist and colleague Hirofumi Uzawa, and a theory of supply which stipulates that people can and often are tricked by unsystematized economic policy. His ideas also provided the basis for several critical recent developments in economics, such as endogenous growth theory, behavioral economics, and the law of one price. He also 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.
The Nobel Prize in Economics
In 1995 Lucas was awarded the Nobel Memorial Prize in Economics for developing the theory of rational expectations. His theory held that consumers make a complex set of decisions which offset and may thwart the monetary and fiscal moves made by the government, based on past experiences and goals which may not align with the government's goals.