People don't just react to economic policy — they predict it and price it in
In 1961, John Muth proposed that people form expectations using all available information, not sluggish rules of thumb, so on average they aren't systematically fooled. Robert Lucas built this into 1970s macroeconomics, arguing that a government trying to stimulate the economy with a predictable policy trick fails once people see it coming. The idea reshaped how central banks think about credibility.