Robert Lucas: the rationality of capitalism

Prispevek Roberta Lucasa (pogostega “infamous gosta” na tem blogu) k ekonomski teoriji:

“Lucas was widely acclaimed because he furthered mainstream theory that markets could work without crises or distortions as long as individuals has sufficient information to make ‘rational decisions’ on their own interests. So the reality of crises and inequalities was due not to capitalist markets but to ‘irrational’ decisions by authorities or unions interfering with markets.

In particular, Lucas attacked the Keynesian ‘aggregate demand’ theory of economies, namely the Keynesian conclusion that total demand could fall below total supply in an economy, leading to periods of high unemployment. Lucas argued that if governments intervened to increase money supply or increase spending to boost aggregate demand, they would distort the ‘rational expectations’ of individuals and only make things worse.”

Njegov vrh triumfa ter kako je končala njegova napoved:

“Given his victory over the Keynesians; given the apparent success of the advanced capitalist economies in the 1990s; and given the neoliberal policies of reduced government ‘interference’ and ‘independent’ central banks, Lucas was confident that harmonious capitalist development was here to stay. In 2003, he made the now infamous statement that “macroeconomics in this original sense has succeeded: Its central problem of depression prevention has been solved, for all practical purposes, and has in fact been solved for many decades.” As Romer remarked it “Using the worldwide loss of output as a metric, the financial crisis of 2008-9 shows that Lucas’s prediction is far more serious failure than the prediction that the Keynesian models got wrong.””

Ampak o mrtvih vse dobro.

Michael Roberts Blog

Robert Lucas has died at the age of 85.  Lucas was a leading mainstream neoclassical economist at the University of Chicago – the bastion of neoclassical equilibrium economic theory.  In 1995, Lucas received a ‘Nobel prize’ for his theory of ‘rational expectations’.  He was regarded by Greg Mankiw, the author of the main mainstream economics textbook used in universities, as “the most influential macroeconomist of the last quarter of the 20th century.”

It is an irony, given the body of his work, that when Lucas started studying economics, he considered himself a “quasi-Marxist” because he reckoned that it was the economic foundation of society that was the driver of history, not the ideas of individuals.  The irony is that his main contribution to mainstream economics was eventually to present a theory that economic change was driven by the ‘rational’ action of ‘agents’ i.e, individuals as consumers.

What is ‘rational expectations’…

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