Robert Lucas, economist, 1937-2023 | Financial Times

Robert Lucas, Nobel laureate economists “create an image of practicality and worldliness” he told the students graduated from the University of Chicago in 1988, “but we are basically storytellers, creators of make-believe economic systems”.

Lucas, who has died aged 85, embodied that description. The work of one of the most influential economists of the past half-century has had a significant impact on the real world—underpinning the shift from the expansionist Keynesian policies of the 1960s to a conservative view that fiscal or monetary fine-tuning is a futile endeavor.

But Lucas himself was a theorist, not a political consultant. He developed models that became standard tools in modern macroeconomics, used by both those who shared his views and those who opposed them.

“Bob Lucas was truly a master of model building,” said Esteban Rossi-Hansberg, a close colleague at the University of Chicago. Olivier Blanchard, former chief economist of the IMF, called him “a perfect example of a destructive creation” who “made our intellectual life more difficult but much more exciting”.

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He was born in 1937 in Yakima, Washington. Lucas grew up in Seattle, where his mother worked as a fashion artist and his father worked as a welder for a commercial refrigeration company. His parents were New Deal supporters in a Republican neighborhood who were eager to instill the idea—as he later was. wrote — “so that man can decide for himself what kind of man he should be”.

Lucas initially latched onto this New Deal policy when a scholarship offer took him to the University of Chicago—where he would spend most of his career. He majored in history and, after an interlude at Berkeley, California, began studying economics in a department where he and many others who were to achieve international fame were drawn to free-market advocate Milton Friedman. His first teaching position was at the Carnegie School of Technology, but he returned to Chicago in 1974.

By this time, Lucas had already published one of his best-known papers – using the “rational expectations” hypothesis – in which he argued that governments could use expansionary policies to reduce unemployment, which would also result in higher growth. inflation.

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Lucas formulated a model showing that such attempts fail because people change their behavior after learning to expect higher inflation. The idea, as his former colleague John Cochrane puts it, was that “it could [only] fool people once or twice”.

A later paper in 1976 introduced what is now known as the “Lucas critique,” arguing that macroeconomic models fail when they rely on past behavior. Economists could not predict the results of changes in exchange rate, monetary or tax policy unless they considered how behavior might change as a result.

In the words of the committee that awarded Lucas the Nobel Prize in Economics that year, by 1995 these ideas were “fully integrated into current thinking.”

Not all of his contributions have stood the test of time. In 2003, he argued that “the central problem is a [economic] The prevention of depression is for all practical purposes solved, and it has been solved for decades.”

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Lucas received the Nobel Prize in Economics in 1995.  From King Károly Gustaf of Sweden

Lucas received the Nobel Prize in Economics in the 16th century. From King Károly Gustaf of Sweden in 1995 © Jack Mirjut/SCANPIX SWEDEN/AFP/Getty Images

But Lucas has also brought his modeling tools to many other fields—including fiscal policy, urban economics, and international trade. Much of his later work focused on increasing growth rates in poorer countries, where he described the consequences for human well-being as “simply staggering”.

According to Rossi-Hansberg, the strength of Lucas’s models lies in the ability to make the right abstractions and the clarity of the mathematical language. But he also wrote with surgical precision – and he tried to get his students to do the same, scribbling detailed wording notes on their papers in red ink.

He generously continued to mentor students even after he retired from teaching in 2015. But Lucas was also intolerant of anything he saw as sloppy or intellectually dishonest, Cochrane said, calling him “an absolute straight arrow.”

When the economist won the Nobel Prize in Economics, he had to share the prize money with his then-ex-wife, Rita Cohen Lucas, who had included a clause in their divorce settlement six years earlier that entitled him to “50 percent of any money.” Nobel Prize”. But at the time he cheerfully said: “A deal is a deal.”

He is survived by his partner, Nancy Stokey, professor of economics at Chicago, a colleague and frequent co-author. two sons with his first wife and five grandchildren.