Lucas critique
E52550
The Lucas critique is an influential argument in macroeconomics asserting that policy evaluations based on historical correlations are unreliable because people’s expectations and behavior change systematically when policy rules change.
Aliases (3)
Statements (47)
| Predicate | Object |
|---|---|
| instanceOf |
critique of econometric policy evaluation
→
economic theory → macroeconomic concept → |
| addresses |
econometric model stability
→
expectations formation → policy evaluation → |
| appliesTo |
fiscal policy evaluation
→
monetary policy evaluation → regime changes in economic policy → |
| assumes |
expectations depend on policy rules
→
forward-looking economic agents → |
| contrastsWith |
traditional Keynesian econometric policy evaluation
→
|
| coreClaim |
agents adjust expectations systematically in response to policy changes
→
policy evaluations based on historical correlations are unreliable when policy rules change → structural relationships in econometric models change when policy regimes change → |
| criticizes |
Keynesian large-scale econometric models
→
assumption of invariant historical relationships under new policies → use of reduced-form econometric models for policy evaluation → |
| describedInWork |
Econometric Policy Evaluation: A Critique
→
|
| emphasizes |
microfoundations of macroeconomic models
→
rational expectations → |
| field |
econometrics
→
macroeconomics → |
| hasConsequence |
greater focus on structural parameters in policy analysis
→
shift from ad hoc to microfounded macro models → |
| historicalContext |
1970s macroeconomic policy debates
→
|
| implies |
historical correlations may not be valid under new policy regimes
→
macroeconomic models should be derived from optimizing behavior → policy-invariant parameters must be structural and microfounded → |
| inAcademicDebate |
macroeconomic model design
→
validity of large-scale econometric models → |
| influenced |
central bank policy analysis frameworks
→
development of new classical macroeconomics → modern dynamic stochastic general equilibrium models → real business cycle theory → |
| methodologicalStatus |
foundational argument in modern macroeconomic methodology
→
|
| namedAfter |
Robert E. Lucas Jr.
→
|
| proposedBy |
Robert E. Lucas Jr.
→
|
| publicationYear |
1976
→
|
| publishedIn |
Carnegie-Rochester Conference Series on Public Policy
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|
| relatedTo |
microfoundations of macroeconomics
→
policy invariance → rational expectations revolution → structural econometric models → time inconsistency of optimal policy → |
| requires |
explicit modeling of expectations formation
→
model parameters that are invariant to policy changes → |
Referenced by (4)
| Subject (surface form when different) | Predicate |
|---|---|
|
Lucas critique
("Econometric Policy Evaluation: A Critique")
→
|
describedInWork |
|
Finn E. Kydland
("Rules Rather Than Discretion: The Inconsistency of Optimal Plans")
→
|
notableWork |
|
New Keynesian economics
→
|
respondsTo |
|
New Classical macroeconomics
("Lucas critique of traditional policy evaluation")
→
|
supportsView |