Robert Emerson Lucas Junior
Robert Emerson Lucas Jr. pursued his Bachelor’s degree in History at the University of Chicago and later completed his Master’s degree and Ph. D. in economics at the same university in 1964. He also taught at the University of Carnegie Mellon until 1974 before he went back to the University of Chicago. He is a renowned economist, and was awarded the Nobel Prize for his distinguished works in the fields of economics in 1995 Nobel Prize for economics through his development and application of the econometrics hypothesis and rational expectation theory. His contribution in the field of economics earned him a lot of respect globally making his very influential figure and economics specialist. Lucas has served in the American Economic Association and Econometric Society as president for quite some time. A platform that enabled him to write and edit many economics journals. In 2001 Lucas published his work collectively in the book whose title is ‘the literature for economic growth.’
In his theory of rational expectation, he encompasses this ideology with the overall equilibrium model. In this model, the rational of the agent is used because they are based on information concerning the future quantities and price. Lucas develops a sound theory that reveals the relation between output and inflation. As a critical thinker, Lucas challenged primary economics theories, for example, the Keynesian economic approach. To him, the macroeconomic models need to be an aggregate of the micro-economic models (Robert E. Junior, Britannica).
He also developed what is what is known as Lucas Critique in economic policy making the critique that may indicate the relation between inflation and unemployment. In this critique, Lucas challenged the Philips curve which had shown that to reduce the rate of unemployment in a country, the government was supposed to increase the inflation. The assumption based on the Philips curve is that inflation causes the wages of the workers to increase fast. Therefore, these workers think that the increment of their pay is because of the generosity of the government, yet is just because of inflation. The unemployed will be more willing to take up the job more efficiently because they feel they are well remunerated, and as, such reducing the rate of unemployment. Lucas indicates that labor supply function is a component of both the Keynesian type of employment theory and neoclassical growth theory, (Lucas Jr & Rapping, 1969).
Lucas criticism of this approach is that government cannot fool workers repeatedly, and thus at some point inflation will cease to reduce the rate of unemployment. And consequently, continuous higher inflation will result to increase in unemployment instead. According to Lucas introducing policy that seeks to manipulate the workers to create false expectations and hope, will result in restlessness in the economy and ultimately will fail to address the concerns. He terms such kind of policies as policies of an ineffective proposition.
This development of the microeconomics is what spearheaded the establishment of new classical macroeconomics. He is attributed to the introduction of the theory of supply which state that people can easily be tracked using the monetary policy. Using this, he was able to explain why there is an insufficient flow of capital from the developed countries to less developed countries. Lucas is credited to his contribution toward the development of investment theory, economic growth theory. In the theories, Lucas develops s models of business cycles that help to cement his overview of economic theory.
In conclusion, Robert Emerson Lucas Jr has made tremendous development in the field of economics through developing different theories and offering critiques to existing theories to provide a clear academic discourse on some theories. The theories that he has developed include the economic growth theory, the rational expectation theory. It is the development of economic theories works that enhanced the international recognition that made him be awarded of Nobel Prize in Economics.?
Lucas Jr, R. E. & Rapping, L. A. (1969). Real Wages, Employment and inflation. Journal of Political Economy, 77(5), 725-754.
Britannica.com. Robert E. Lucas, Jr. www.britannica.com/biography/Robert-E-Lucas-Jr