3

An Interview with

Robert E. Lucas, Jr.

Interviewed by Bennett T. McCallum

CARNEGIE MELLON UNIVERSITY

Summer 1998

Bob Lucas is widely regarded as the most in¬‚uential 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 ascend-

ance of rational expectations, the emergence of a coherent equilibrium

theory of cyclical ¬‚uctuations, and speci¬cation 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 ¬scal and in¬‚ation 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

Reprinted from Macroeconomic Dynamics, 3, 1999, 278“291. Copyright © 1999

Cambridge University Press.

58 Bennett T. McCallum

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 re¬‚ective 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 eco-

nomic 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 suf¬ce”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 pre-

vious interviews, but I think that readers will ¬nd them stimulating. The

process of obtaining them was somewhat challenging but highly inform-

ative and thoroughly enjoyable for me.

McCallum: Let me begin by asking how and when you got interested

in economics, both generally and

as the subject for a career.

Lucas: When I was seven or

eight, my father asked me if I

had noticed how many different

milk trucks stopped at our block:

Darigold delivered to some houses,

Carnation to others, and so on.

We counted to ¬ve or six. He

asked me if I thought there were

any differences in the milk pro-

vided by these dairies. I thought

not. He then told me that under

socialism only one truck will de-

liver to all the houses on each

block, and the time and gasoline

wasted in duplicating routes will

be used for something else.

I doubt very much that this

was my ¬rst discussion of eco-

nomics, but it is the earliest I can

Figure 3.1 Robert E. Lucas, Jr.

An Interview with Robert E. Lucas, Jr. 59

remember. My parents had come of age politically in the 1930s, and the

virtues of free markets were not right at the front of their thinking, or

mine. We took it for granted that an economic system should be intelli-

gently managed, and we debated every day over the details of how this

could and should be done.

As an undergraduate at Chicago in the 1950s, I got the idea that an

intellectual career was a possibility, and knew that was what I wanted for

myself. In college, these interests and prejudices led me to history. Early

in graduate school, I shifted to economics.

McCallum: And how did you happen to go to Chicago as an

undergraduate?

Lucas: My alternative was to stay at home and attend the University

of Washington in Seattle. Chicago gave me a full-tuition scholarship,

which was the ticket I needed to move out on my own. This was some-

thing I needed to do.

McCallum: Then as a graduate student in history? Can you tell us a

bit about your reasons for shifting to economics?

Lucas: I drifted into economics from economic history, with no idea

of what economics is or what economists do. This was just luck, but

I soon discovered the essential role that mathematical reasoning played

in economics, and it didn™t take me long to see that this way of thinking

about human behavior was congenial to me.

Figure 3.2 Louis Chan, Robert Lucas, and Chi-Wa Yuen at Victoria Peak in

Hong Kong.

60 Bennett T. McCallum

McCallum: How did you develop your outstanding mathematical tools?

Lucas: It is easy to forget how little math one needed to know to be

at the technical end of economics, back in the early 1960s. I had had

calculus and differential equations as an undergraduate, before I got into

history. Samuelson™s Foundations taught me (and the rest of my cohort)

how people were using math in economics. In my summers as a graduate

student, I took a linear algebra course and a rigorous calculus course. I

also took the mathematical statistics sequence from Chicago™s statistics

department. With this background, I have kept learning on my own, and

much of the math I use now I picked up since leaving graduate school.

McCallum: While you were a Ph.D. student at Chicago, which faculty

members had major in¬‚uences on your intellectual development? Describe

these a bit, please.

Lucas: The biggest in¬‚uence by far, on me and all my classmates, was

Milton Friedman. His two graduate price theory courses were fabulously

exciting and valuable: a life-changing experience. But I was a very receptive

graduate student and learned a lot from many other people. Al Harberger

was doing quantitative general equilibrium modeling then, in a way that

still looks quite modern. Martin Bailey, Carl Christ, and Harry Johnson

were our other macroeconomics teachers. Gregg Lewis went through his

book on unions in an advanced seminar that I learned a lot from.

Among the younger faculty, Zvi Griliches taught econometrics, and

encouraged technical types like me. Dale Jorgenson, a visitor in 1962“

63, was inspiring to me. Don Bear taught a terri¬c course in mathematics

for economists.

McCallum: Somehow I had the impression that Uzawa in¬‚uenced

you in some way. Is that just completely wrong?

Lucas: Uzawa joined the Chicago faculty the year after I left, so he

was not one of my teachers. But I did attend two summer conferences on

dynamic theory that Uzawa and David Cass organized, one at Chicago

and another at Yale. These involved me in intense interactions with the