In 1995, Robert E. Lucas, Jr., was awarded the Nobel Prize in Economic Sciences. This review places Lucas’ work in a historical context and evaluates the effect of this work on the economics profession. Lucas’ central contribution is that he developed and applied economic theory to answer substantive questions in macroeconomics. Economists today routinely analyze systems in which agents operate in complex probabilistic environments to understand interactions about which the great theorists of an earlier generation could only speculate. This sea change is due primarily to Lucas.
This essay is reprinted, with permission, from the _Journal of Economic Perspectives_ (Winter 1998, vol. 12, no. 1, pp. 171-86). © 1998 by the American Economic Association. All rights reserved. The essay was edited for publication in the Federal Reserve Bank of Minneapolis Quarterly Review. https://doi.org/10.1257/jep.12.1.171