Robert Lucas Jr.

Biography

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

Lucas received his B.A. in History in 1959 from the University of Chicago. While he attended University of California, Berkeley as a graduate student in 1959, Lucas dropped out due to financial reasons and returned to Chicago in 1960, earning Ph.D. in Economics in 1964. His dissertation “Substitution between Labor and Capital in U.S. Manufacturing: 1929–1958” was written under supervision of Arnold Harberger and H. Gregg Lewis. 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.

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.

After his divorce with Rita Lucas, he married Nancy Stokey. They have collaborated in papers on growth theory, public finance, and monetary theory. Lucas has two sons: Stephen Lucas and Joseph Lucas.

A collection of his papers are housed at the Rubenstein Library at Duke University.

Rational expectations

Lucas is well known for his investigations into the implications of the assumption of the rational expectations theory. 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. That led to the development of new classical macroeconomics 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) 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 provided the intellectual foundation for the understanding of deviations from the law of one price based on the irrationality of investors.

In 2003, he stated, 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.”