Robert E. Lucas Jr., Nobel Prize-winning conservative economist, dies at age 85

Robert E. Lucas Jr., a contrarian Nobel laureate in economics who supported conservative arguments that government intervention in fiscal policy is often self-defeating, died Monday in Chicago. He turned 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 name a cause.

In awarding the Nobel Memorial Prize in Economics in 1995 to Professor Lucas, the University of Chicago’s fifth winner in economics in six years, the Swedish Royal Academy of Sciences described him as “the economist who influenced macroeconomic research”. since 1970.”

Although he advanced a number of groundbreaking, if sometimes controversial, theories, Professor Lucas was best known for his “rational expectations” hypothesis, advanced in a critique of macroeconomics in the early 1970s.

In that critique, he challenged John Maynard Keynes’ longstanding doctrine that government could manipulate the economy to achieve certain outcomes through reflexive interventionist policies, such as changing interest rates or taking other steps to control inflation. increase or curb or reduce unemployment.

In the real world, Professor Lucas argued, consumers and businesses make their decisions based on rational expectations drawn from their own past experiences.

“His idea was that macroeconomic models based on many equations are primarily based on past behavior,” said David R. Henderson, a research fellow at Stanford University’s Hoover Institution in California and a professor of economics at the Naval Postgraduate School in Monterey. . “But if people learn from what the government is doing” and respond accordingly in their own best interest, “those models will be poor predictors of future behavior.”

As a result, Professor Lucas said, government economic policies can self-destruct by not achieving the intended results.

As economics columnist Leonard Silk wrote in The New York Times in 1983, “If people understand and anticipate what the government is doing—for example, trying to accelerate economic growth by accelerating the increase in the money supply—workers will increase their wages. demands and companies will raise prices to protect themselves against future inflation, defeating the government’s intention to increase real growth.”

In an agenda with conservative economic policy implications, Professor Lucas argued that government spending that crowds out private investment is counterproductive; that the money supply is most important; and that policy of reducing inequality by redistributing income, though “tempting,” is “in my opinion the most toxic” to a healthy economy.

He also advocated abolishing taxes on capital gains, or income from capital. And he embraced supply-side economics, which calls for increasing the supply of goods and services while lowering taxes to promote job creation, business expansion, and entrepreneurial activity.

“The supply economists,” he said in a interview from 1993“delivered the largest truly free lunch I’ve seen from this company in 25 years, and I believe we’d be a better society if we followed their advice.”

In 1995, not long after eight years under President Ronald Reagan, a supply-side advocate, and four years under another Republican, George HW Bush, Professor Lucas concluded that “the U.S. economy is in great shape,” in part because “the government does not try to do things with economic policy that it is not able to do.”

And, he said, the same principles that encouraged economic growth in rich countries could be applied to economic development in poorer countries.

In a 1988 reading titled “What Economists Do”, Professor Lucas explained: “We economists should be storytellers. We do not think that the realm of imagination and ideas is an alternative to, or a retreat from, practical reality. On the contrary, it is the only way which we have found to seriously reflect on reality.”

Robert Emerson Lucas Jr. was born in Yakima, Washington, on September 15, 1937. His mother, Jane (Templeton) Lucas, was a fashion artist. His father owned an ice cream shop that went out of business during the Depression, after which the family moved to Seattle, where Robert Sr. became a steam fitter in the shipyards and then, after World War II, a welder in a commercial refrigerator company. Years later, he rose to become president of the company, even though he had no college or technical training.

But before his father’s fortunes changed, Robert Jr., hoping to become an engineer, needed a scholarship to attend college and was offered one by the University of Chicago, although it had no engineering school. Not having the guts to study physics, he said, he became history major. He graduated in 1959.

He then enrolled in a graduate program in economics at the University of California, Berkeley. But again in need of financial support, he returned to the University of Chicago, where he studied with conservative economist Milton Friedman, who would receive the 1976 Nobel Prize in Economics. Professor Lucas received his doctorate in economics in 1964.

He taught at what is now Carnegie Mellon University from 1963 to 1974, returning to the University of Chicago as a professor in 1975.

In 1959, he married Rita Cohen, a fellow student in Chicago. They separated in 1982 and divorced several years later. Among his survivors are their sons, Stephen and Joseph; his partner, Prof. Nancy L. Stokey, with whom he collaborated on some of his research at the University of Chicago; a sister, Jennifer Spurr; a brother, Peter; and five grandchildren.

Four years before Mr. Lucas won his Nobel Prize, his estranged wife expressed great confidence in his future. Her lawyer had included a clause in their divorce agreement stating that she would receive half of the Nobel money he would receive if the honor was awarded before October 31, 1995. He received the award barely three weeks before that deadline.

Professor Lucas was philosophical about collecting $300,000 instead of the full $600,000. He would have hesitated during the divorce negotiations, he said, had he had a greater rational expectation that he would become a Nobel laureate.

“A deal is a deal,” he said at the time. ‘She’s got the whole house. Getting half price was better than nothing.”