Lucas critique

The Lucas critique argues that it is naïve to try to predict the effects of a change in economic policy entirely on the basis of relationships observed in historical data, especially highly aggregated historical data.^[1] More formally, it states that the decision rules of Keynesian models—such as the consumption function—cannot be considered as structural in the sense of being invariant with respect to changes in government policy variables.^[2] It was named after American economist Robert Lucas's work on macroeconomic policymaking.

The Lucas critique is significant in the history of economic thought as a representative of the paradigm shift that occurred in macroeconomic theory in the 1970s towards attempts at establishing micro-foundations.

^ Lucas, Robert (1976). "Econometric Policy Evaluation: A Critique" (PDF). In Brunner, K.; Meltzer, A. (eds.). The Phillips Curve and Labor Markets. Carnegie-Rochester Conference Series on Public Policy. Vol. 1. New York: American Elsevier. pp. 19–46. ISBN 0-444-11007-0. Archived (PDF) from the original on 2021-11-05.
^ Sargent, Thomas (1987). "Lucas's Critique". Macroeconomic Theory (Second ed.). Orlando: Academic Press. pp. 397–98. ISBN 0-12-619751-2.

[Lucas76-1] Lucas, Robert (1976). "Econometric Policy Evaluation: A Critique" (PDF). In Brunner, K.; Meltzer, A. (eds.). The Phillips Curve and Labor Markets. Carnegie-Rochester Conference Series on Public Policy. Vol. 1. New York: American Elsevier. pp. 19–46. ISBN 0-444-11007-0. Archived (PDF) from the original on 2021-11-05.

[2] Sargent, Thomas (1987). "Lucas's Critique". Macroeconomic Theory (Second ed.). Orlando: Academic Press. pp. 397–98. ISBN 0-12-619751-2.

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