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Robert Lucas Jr.: 3 ideas worth knowing

3 ideas from Robert Lucas Jr., each explained in a minute and credited to the original work. Free on Savvy.

• Past economic data can mislead you about how people will react to a new policy

  Governments used to assume relationships seen in historical data — like unemployment falling when inflation rises — would hold after a policy change. Robert Lucas argued this is na…

  — Robert Lucas Jr., Econometric Policy Evaluation: A Critique

• Rich countries barely invest in poor ones, and standard theory can't explain why

  Textbook economics says capital should rush toward poor countries, where it's scarce and returns should be highest. In 1990, Robert Lucas pointed out that hardly any does — investm…

  — Robert E. Lucas Jr., Why Doesn't Capital Flow from Rich to Poor Countries?

• A 1976 paper argued that past economic data can't predict a new policy's effects

  Robert Lucas argued that traditional economic models, built from historical relationships between things like spending and employment, break down the moment policy actually changes…

  — Robert Lucas Jr., Econometric Policy Evaluation: A Critique

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