Robert E. Lucas Jr., 1937-2023: Nobel Laureate and Pioneer of Rational Expectations

Robert “Bob” Lucas Jr., an economist, educator and Nobel Prize in Economics laureate, died May 15. He was 85.

Lucas’ work gained prominence in the 1970s, and he was one of the principal figures in new classical macroeconomics, a school of economic thought that challenges Keynesian economics, arguing market equilibrium occurs when supply and demand are equal.

He received the Nobel Prize in Economics in 1995 for developing and applying the hypothesis of rational expectations to the economy, which “transformed macroeconomic analysis and deepened our understanding of economic policy,” according to the Nobel website. His hypothesis argues that people make economic decisions based on the past and anticipated future of the economy.

Starting in the early 1970s, Lucas argued that the Phillips Curve, the idea (in shorthand) that inflation reduces unemployment, was creating false expectations for the economy. Lucas showed inflation has no effect on average unemployment in the long-term, an idea known as the Lucas islands model. He used the so-called Lucas critique to show the effects of economic policy changes shouldn’t only be dependent on previous data. Some of Lucas’ other research included advancements in investment theory, monetary theory, international finance and economic growth theory.

His critique upsetting a traditional viewpoint was at first put him on the outside, but his field warmed to his critique and later made it the norm. As the University of Chicago News Service noted in its obituary on Lucas:

Colleagues, students and members of the economic community took to Twitter to remember Lucas’ legacy. Macroeconomist and professor of economics at the London School of Economics Benjamin Moll shared an anecdote from 2009 when he was a University of Chicago graduate student and Lucas was on his thesis committee. Moll recalled asking Lucas for help with a paper, and Lucas left Moll thorough notes that helped improve his writing.

“One point here is about Bob’s immense generosity toward young researchers. While he makes it look so easy, writing these comments must have taken some proper time. What other Nobel laureate gives a grad student such detailed comments? It’s also just one example of many,” the post reads. “Another point is about the art of good writing in economics. Bob was the absolute master of this art. Just pick up some of his writing and read it today.”

Robert Emerson Lucas Jr. was born Sept. 15, 1937, in Yakima, Washington, the oldest son of an initially blue-collar family who – despite being Republicans – supported President Franklin Roosevelt’s New Deal. He attended the University of Chicago on scholarship and graduated with a bachelor’s degree in history in 1959. He went on to attend the University of California Berkeley, intent on continuing his studies in classical history but where courses in economic history sparked his interest in economics.

“Though I had no real idea what a professional historian does, I had learned that one can make a living by pursuing one’s intellectual interests and writing about them,” Lucas said in a Nobel Prize autobiography. “I began thinking about an academic career.”

After spending a year at Berkeley, Lucas returned to the University of Chicago, where he received his Ph.D. in economics in 1964.

From 1963 to 1974, Lucas taught economics at Carnegie-Mellon University, and he returned to the University of Chicago in 1975, where he served as a professor of economics for 40 years. In 2016, he received the Phoenix Prize, a University of Chicago award that recognizes faculty who have impacted research in the social sciences. From 1980 until his retirement in 2015 he was the John Dewey distinguished professor emeritus in economics at Chicago.

“Chicago,” he wrote in his  autobiography, “has been a marvelous place for me, as I knew it would be from my student experiences, and I have been simulated by colleagues and graduate teaching into research on monetary theory, international-trade, fiscal policy and economic growth; all the basic topics in macroeconomics.”

Throughout his career, Lucas published various major research articles, including that 1972 article “Expectations and the Neutrality of Money,” 1977’s “Understanding Business Cycles,” 1987’s “Models of Business Cycles,” and 1988’s “On the Mechanics of Economic Development.” His books include Studies in Business-Cycle Theory from 1981, Rational Expectations and Econometric Practice, also from 181 and co-authored with Thomas Sargent, and 1989’s Recursive Methods in Economic Dynamics, co-authored with Nancy Stokey and Edward Prescott.

“The consequences for human welfare involved in questions about human capital spillovers are simply staggering,” said Lucas in On the Mechanics of Economic Development. “Once one starts to think about them, it is hard to think about anything else.”

He was president of the Econometric Society in 1997 and of the American Economic Association in 2002. He was a member of the American Academy of Arts and Sciences, the National Academy of Sciences and the American Philosophical Society.

Lucas is survived by wife and co-author Nancy Stokey, herself the Frederick Henry Prince Distinguished Service Professor of Economics at Chicago; sons Stephen and Joseph; sister Jenepher Spurr; brother Peter J. Lucas; and grandchildren Lily, Ginger, Solomon and Sophia.