Macroeconomic Dynamics



Bennett T. McCallum c1


Bob Lucas is widely regarded as the most influential economist of the past 25–30 years, at least among those working in macro and monetary economics. His work provided the primary stimulus for a drastic overhaul and revitalization of that broad area, an overhaul that featured the ascendance of rational expectations, the emergence of a coherent equilibrium theory of cyclical fluctuations, and specification of the analytical ingredients necessary for the use of econometric models in policy design. These are the accomplishments for which he was awarded the 1995 Nobel Prize in Economic Sciences. In addition, he has made outstanding contributions on other topics—enough, arguably, for another prize. Among these are seminal writings on asset pricing, economic growth and development, exchange-rate determination, optimal fiscal and inflation policy, and tools for the analysis of dynamic recursive models.

Clearly, Bob Lucas is very much a University of Chicago product; he studied there both as an undergraduate and as a Ph.D. student and has been on the faculty since 1975. Also, he has served as chairman of the Chicago Department of Economics and two terms as an editor of the Journal of Political Economy. Nevertheless, I and several colleagues at Carnegie Mellon like to point out that Bob was a professor here in the Graduate School of Industrial Administration from 1963 until 1974, during which time he conducted and published the central portions of the work for which he was awarded the Nobel Prize. Consequently, I could not resist asking Bob a few questions about his GSIA years in the interview.

Many researchers in the economics profession have been impressed and inspired by Lucas's technical skills, but the clarity and elegance of his writing style also deserve mention, plus his choice of research topics. The latter is reflective of Bob's utter seriousness of purpose. Each of his projects attacks a problem that is simultaneously of genuine theoretical interest and also of considerable importance from the perspective of economic policy. There is nothing frivolous about Lucas's research, as he had occasion to remind me during our interview.

As is well known to those who have been around him, Bob Lucas is a person who never uses three words when one will suffice—but that one will usually be carefully chosen. This characteristic shows up in the interview below. As a departure from standard MD Interview practice, and with the Editor's permission, this interview was conducted at a distance—i.e., via mail and e-mail. It yielded a smaller number of pages than have previous interviews, but I think that readers will find them stimulating. The process of obtaining them was somewhat challenging but highly informative and thoroughly enjoyable for me.

Key Words: Rational Expectations; Business Cycle; Policy Analysis; Economic Growth and Development; Asset Pricing; Optimal Taxation.

c1 Address correspondence to: Bennett T. McCallum, Graduate School of Industrial Administration, Carnegie Mellon University, Tech and Frew Streets, Pittsburgh, PA 15213-3890, USA; e-mail: