Nobel prize winnings in a divorce settlement — that’s how much economist Robert E Lucas’ ex-wife believed in him
Robert E Lucas, Nobel Laureate revolutionized the approach to macroeconomicsand smashed Keynesian school of economics.
- He countered the theory that raging inflation would solve the unemployment problem.
- His wife followed his theory on markets and possibilities and that helped her get half his Nobel prize money even after their divorce.
AdvertisementEconomists are often seen as storytellers who live in the make-believe world of theory and conjecture. But Robert Lucas, who spent most of his life in the University of Chicago, managed to influence his wife’s thinking so deeply with his theories on the market and possibilities that she made him commit half of the $1 million prize money if he ever won the coveted Nobel Prize. Lucas was divorced six years before he won the Nobel Prize, and he honoured the commitment made in his divorce settlement.
His first wife
A critique on orthodox economic policies
Lucas passed away at the age 85 on May 15. But his theories on the close relationship between price rise and the employment market is legion. He is seen as a neoclassical economist who believed that policy interventions in the form of tax cuts to boost employment, did not work.
Many even pronounced the death of the Keynesian school of economics in the 70s, as Lucas became more vocal about his critique of orthodox economic policies. The Keynesian school of economics models that all economic outcomes like output and inflation are a result of aggregate demand.
Lucas won the Nobel Prize for Economics in 1995 for developing and applying the hypothesis of rational expectations. Whilst awarding him this prize, the Royal Swedish Academy of Sciences said that “Robert Lucas is the economist whose work has had the greatest impact on the development of macroeconomics and macro econometrics since 1970.”
The rational expectations theory
Lucas questioned and opposed the theory behind The Phillips Curve, which asserts that governments can decrease unemployment by boosting inflation and growth. His work also challenged Keynesian policy solutions and conclusions related to government intervention in the economy. His rational expectations theory showed that people take rational decisions about their individual economic welfare which will in turn impact the efficacy of government policies.
This marked a monumental shift in the world’s approach to and understanding of macroeconomics. He is also remembered for the Uzawa-Lucas model of human capital accumulation and the ‘Lucas Paradox’.
He authored many books, some of which include Studies in Business-Cycle Theory (1981), Rational Expectations and Econometric Practice (1981, with Thomas Sargent) and Recursive Methods in Economic Dynamics (1989, with Nancy Stokey and Edward Prescott).
Personal life and career
Robert Lucas was born in Yakima, Washington on September 15, 1937. His family later shifted to Seattle to open a small restaurant called The Lucas Ice Creamery and he graduated from Roosevelt High School. He attended the University of Chicago where he earned his undergraduate degree in history in 1959. He moved to economics after realising that economic factors were often the key drivers of history.
Although he spent his first year as a graduate student at University of California, Berkeley, he returned to Chicago to complete his Ph.D in economics in 1964. He spent eleven years teaching at Carnegie Mellon University after which he returned to Chicago as a professor of economics which he continued for 40 years.
AdvertisementIn 1959, he married Rita Cohen, a fellow Chicago undergrad with whom he had two sons — Stephen and Joseph. The couple separated in 1982 after which he married Nancy Stokey, a distinguished economist in her own right. They collaborated in papers on growth theory, public finance, and monetary theory.
Amongst many laurels, namely the Nobel Prize, he was a Guggenheim Fellow and a fellow of the Econometrics society. A message from Robert Shimer, Department Chair of The Kenneth C Griffin department of Economics at the University of Chicago, stated, “Bob leaves behind a legacy of revolutionary research, teaching, and leadership that transformed the field of economics and this department.”
He is survived by his wife Nancy Stokey, his sons Stephen and Joseph, his sister Jenepher Spurr, his brother Peter J Lucas, and five grandchildren.
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