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His Life Robert Lucas is one of the most influential modern economic theorists . He is the leader of the New Classical school - the "modern" version of the Chicago School. He received the Nobel Laureate in Economics in 1995 for having developed and applied the hypothesis of rational expectations, and thereby having transformed macroeconomic analysis and deepened our understanding of economic policy. The Swedish Academy of Sciences in its release called Lucas "the economist who has had the greatest influence on macroeconomic research since 1970." Lucas' work has had a profound effect on macroeconomics, or the study of the economy as a whole. His works has shown that because people make rational decisions about their economic welfare, their actions can alter the expected results of government economic policies. The result is a rethinking of the effect of government economic policies. Because of Lucas' work, economists today are better informed and less optimistic about the ability of governments to fine-tune economies through changes in monetary or other policies. On Rational Expectations… The theory of rational expectations is based on the belief that people make economic choices based on their previous experiences and their rational expectations of the results of those choices. The theory was created in 1961 by John Muth, but it was given much greater prominence during the 1970s when Lucas and his colleague, Thomas Sargent, the David A. Rockefeller Professor in Economics and also an economist at the Hoover Institution, applied it to the economy as a whole. What others say about his work… "Conventional macroeconomists only thought about what was happening at the current time, and not what effect macroeconomic policies might have on the future," Rosen said. "Lucas' model of rational expectations says that if citizens anticipate the reactions of policy-makers in the future, then they are going to change their behavior now in a way that could make those policies less effective -- or completely nullify a policy's effect. "The effect of his work is to really change the way economists think about macroeconomics," Rosen said. "It kind of destroyed the Keynesian model. This really took a lot of the thunder out of the Keynesian way of thinking.” Books Among Lucas' books are Rational Expectations and Econometric Practice (1981), which he co-edited with Sargent; Studies in Business-Cycle Theory (1981); Models of Business Cycles (1985); and Recursive Methods in Economic Dynamics, which he published in 1989 with Stokey and Edward Prescott.
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