Robert Lucas

The Lucas critique says that economists cannot reliably predict the effects of a new policy using relationships measured under an old policy regime. People change their expectations and behavior when the rules change, so historical correlations may break down.

Lucas received the 1995 Nobel Memorial Prize in Economic Sciences. The award recognized his development and application of the rational-expectations hypothesis and its transformation of macroeconomic analysis.

Rational expectations do not require every person to predict the future perfectly. They mean that people use available information in ways that avoid systematic forecasting errors within the economic model.

Lucas helped shift macroeconomics toward models built from individual choices, expectations, and explicit constraints. His work became central to new classical economics and influenced later dynamic stochastic general equilibrium models.