Robert E. Lucas Jr., the most influential macroeconomist of the last fifty years, died on Monday May 15, 2023 in Chicago. He was 85. His death was announced by the University of Chicago, where he began teaching as a professor in 1975 and remained a professor emeritus until his death. The announcement did not cite a cause.
Robert E. Lucas, Jr., in full Robert Emerson Lucas, Jr., (born Sept. 15, 1937, Yakima, Wash., U.S., died May 15, 2023), was an American economist who won the 1995 Nobel Prize for Economics for developing and applying the theory of rational expectations, an econometric hypothesis. Lucas found that individuals will offset the intended results of national fiscal and monetary policy by making private economic decisions based on past experiences and anticipated results. His work, which gained prominence in the mid-1970s, questioned the conclusions of John Maynard Keynes in macroeconomics and the efficacy of government intervention in domestic affairs.
Lucas attended the University of Chicago, earning degrees in history (A.B., 1959) and economics (Ph.D., 1964). He taught at Carnegie Mellon University from 1963 to 1974 before returning to Chicago to become a professor of economics in 1975.
Lucas questioned the assumptions behind the Phillips curve, which had been thought to show that a government can lower the rate of unemployment by increasing inflation. According to the Phillips curve, higher inflation causes wages to rise more quickly, thereby fooling unemployed workers into thinking that the higher nominal wages are generous when, in fact, they are simply inflation-adjusted wages. Therefore, the unemployed take jobs more quickly, and the unemployment rate falls.
Lucas argued, however, that workers cannot be fooled again and again; higher inflation will ultimately fail to lead to lower unemployment. More generally, Lucas’s work led to something called the “policy ineffectiveness proposition,” the idea that if people have rational expectations, policies that try to manipulate the economy by creating false expectations may introduce more “noise” into the economy but will not improve the economy’s performance. Lucas is also known for his contributions to investment theory, international finance, and economic growth theory. His Studies in Business-Cycle Theory (1981) collects his research from the 1970s, and Models of Business Cycles (1987) provides an overview of his economic theory.
Lucas edited or coedited several economics journals and served for a time as president of the American Economic Association and the Econometric Society. In 2001 Lucas published Lectures on Economic Growth, a collection of his writings on economic growth.
He has been characterized by N. Gregory Mankiw as “the most influential macroeconomist of the last quarter of the 20th century.”
Obituary from the Department of Economics, University of Chicago
A Message from Department Chair, Robert Shimer, in remembrance of Robert E. Lucas, Jr.
“Bob leaves behind a legacy of revolutionary research, teaching, and leadership that transformed the field of economics and this department. He received his B.A. in 1959 and his Ph.D. in 1964, both from the University of Chicago. After spending 11 years at the Carnegie Institute of Technology (later Carnegie Mellon University), he returned to the University of Chicago in 1975 and has remained here ever since, most recently as the John Dewey Distinguished Service Professor Emeritus in Economics and the College. In 2016, Bob was awarded the Phoenix Prize, the highest honor the Division of Social Sciences can bestow, given only periodically to those who ‘through the course of their careers, have changed the trajectory of research in the social sciences and have thus contributed to the cycle of intellectual renewal across the disciplines.’
It is impossible to overstate Bob’s influence on macroeconomics. At the start of his career, he developed a dynamic theory of labor supply with Leonard Rapping. This approach is now a workhorse in modern macroeconomics. He then began his revolutionary work on the implications of rational expectations for macroeconomics. Most famously, he used rational expectations to develop a theory of inflation, in which policy makers can reduce unemployment in the short run through expansionary monetary policy, but cannot affect the long-run-average unemployment rate, the so-called Lucas islands model. In 1995, he was awarded the Nobel Prize for this pathbreaking research. He followed this up with the Lucas critique, simultaneously criticizing existing empirical macroeconomics and opening the door to revamping this area. He also developed the modern theory of investment with Edward Prescott, and a related theory of equilibrium unemployment. His foundational theory of asset prices gave rise to the Lucas Tree. His work on the theory of the firm lead to the Lucas span-of-control. His research on fiscal policy with Nancy Stokey remains a touchstone of that literature. His calculation of the cost of business cycles and the cost of inflation are fundamental to the modern view of which issues are of greatest macroeconomic importance.
When Bob turned his attention to long-run growth, he developed a fundamental theory of income differences across countries sustained by learning from others, a theme that he pursued through much of his later research. His work on menu cost models with Mikhail Golosov is central to the modern literature on the real effects of monetary policy. His work on urban economics with Esteban Rossi-Hansberg is foundational in the modern literature on spatial economics. His work on international trade with Fernando Alvarez brought that theory into a general equilibrium of the global economy. And his treatise Recursive Methods in Economic Dynamics with Nancy Stokey and Edward Prescott is widely taught in Ph.D. macroeconomics courses and remains the go-to reference for everyone working on dynamic economic problems.”
1969, “Real Wages, Employment and Inflation”, Journal of Political Economy, 77 (5): 721-754 (with Rapping, L.).
1971, “Investment Under Uncertainty”, Econometrica, 39 (5): 659-682 (with Prescott, E.C.).
1972, “Expectations and the Neutrality of Money”, Journal of Economic Theory, 4 (2): 103–24.
1976, “Econometric Policy Evaluation: A Critique”, Carnegie-Rochester Conference Series on Public Policy, 1: 19–46.
1981, Studies in Business Cycle Theory, MIT Press, Cambridge, MA.
1983, “Optimal Fiscal and Monetary Policy in an Economy without Capital”, Journal of Monetary Economics, 12 (1): 55-94 (with Stokey, N. L.).
1987, Models of Business Cycles, Basil Blackwell, Oxford.
1988 “On the Mechanics of Economic Development”, Journal of Monetary Economics, 22 (1): 3–42.
1989, Recursive Methods in Economic Dynamics, Harvard University Press, Cambridge, MA (with Stokey N. L. and Prescott, E. C.)
1990, “Why Doesn’t Capital Flow from Rich to Poor Countries”, American Economic Review, 80 (2): 92–96.
2001, Lectures on Economic Growth, Harvard University Press, Cambridge, MA.
Link to Lucas at the History of Economic Thought Website
Link to Wikipedia page on Robert Lucas
Link to 1995 Nobel Award Press Release
Link to article on Rational Expectations in the EconLib Concise Encyclopedia of Economics
Link to Article on New Classical Macroeconomics in the EconLib Concise Encyclopedia of Economics
Link to article on Economic Growth in the EconLib Concise Encyclopedia of Economics
Link to obituary in the University of Chicago website