Bob Lucas

Robert Lucas passed away this week and, as a star in the field, there is an ongoing avalanche of appreciations about his contributions to economics.  Lucas was a macroeconomist, adjacent to but not part of my own field of labor economics, and so I will mostly leave it to others to discuss his contribution to economics.  But I do have a few things to say about him, not least because, for a time at least, he was my advisor in graduate school at the University of Chicago.

Lucas was as famous as an economist could be in 1984, having gained fame for creating the “rational expectations” revolution in Economics.  And so it was with a measure of fear and intimidation that I learned that he would be my first-year advisor. Larry Sjastaad, the director of graduate education in the department, had told me that I would do well in the program, but I wasn’t at all sure I would measure up to Lucas’ standard.  I soon took Lucas’ assigned course on Money and Banking  - which was about neither money nor banking, by the way - and I found out that, contra Prof. Sjastaad, I was mathematically unprepared for the course.  I got a “C” and deserved worse.

My failings notwithstanding, Lucas was a great teacher.  He was a lean, handsome man who dressed well and who came to class well-prepared, both in terms of his lectures and in his supply of cigarettes.  The 1980s were kind of a waystation between the smoke-filled rooms of the Mad Men era to the virtually smokeless culture I live in today – most professors did not smoke, but those who did, like Lucas, brought an ashtray with them to lecture halls and seminar rooms.  One of my other professors also smoked, but he was an inelegant smoker, always having to strike the match twice on the friction pad and holding the stick in the middle.  Lucas, by contrast, was the most elegant smoker I’ve ever seen, lighting his match with a single swing of his arm and holding the cigarette in a way that conveyed authority and power.  The use of a cigarette to punctuate speech is a lost art, but Lucas was one of its most effective practitioners.

One student in that Money and Banking class, a gangly young man with curly hair, asked slow-to-develop questions, as if he were trying to slow Lucas’ staccato delivery.  This frustrated Lucas and one time, when the student was being particularly slow to tidy up his question, Lucas asked him “Do you have a question, or did you just want the floor in case something popped into your head?”   It was a bit rude, of course, but the guy had it coming and it still makes me laugh.

I roomed that first year with a friend of Lucas’ soon-to-be ex-wife Rita, who had gleefully worked into the prospective divorce settlement a proviso that she would get an equal share of any Nobel prize money that Bob would ever win.  Lucas did in fact win the Prize in 1995, ten years later, and, when his divorce terms became public, reporters asked whether he had any bitterness over sharing the money with his ex-wife.  “A deal’s a deal,” he said.

Nobody ever won a Nobel Prize for a textbook, and that’s one of the reasons why most leading economists do not write them.  Lucas was different, however, as he and his second wife Nancy Stokey, also a star mathematical economist at the University of Chicago, spent years at the peak of their research powers writing a graduate textbook on “recursive methods” that is still in use 30 years later.  He could have spent that time developing models at the frontier of economics, but he thought it more important to help train new economists in the mathematical methods that he had found so useful.  I admire the selflessness.

Lucas taught a course on these methods, too, and I sat in on the course as an upper-level graduate student.  Lucas came to these lectures with energy, focus, and organization that I’ve only seen a few times in my years as a student and teacher.  I don’t think he was ever confused.  It showed in his writing, too, which was unusually good for an economist.  His writing was good in part because he had mastered the mechanics of writing – syntax, structure, and story lines – but also because it was something that he worked hard to master on each and every paper.  It didn’t hurt that he was not afraid to speak bluntly about those with whom he disagreed.

My favorite piece of Lucas’ writing is a mathematically undemanding critique of a 1970s report by the OECD.  The piece distilled Lucas’ impatience with the loose policy recommendations endemic at the time, and still with us to a lesser extent, ideas that sounded like they were the result of serious thought and research but that were, as often as not, not based on any recognizable facts or reasoning.  Economists were too often, Lucas argued, like the physicians of old who, having no real knowledge or skill to offer, would rattle on vaguely about humors, airs, and bile.  Lucas’ response was that economists needed to write their logic down on paper, in mathematical terms that could be either verified or contested.  Yes, mathematizing economics was sometimes hard, but the alternative was confusion and imprecision that drove Lucas nuts.

Lucas could be sarcastic but, like that student in his class, his targets usually had it coming.  When asked his response to another department’s attempt to poach a brilliant but difficult colleague, Lucas, then the department chair, said “we’ll pay moving expenses.”  Harvard’s Jeff Sachs was one of many smart young economists advising eastern European countries after the fall of the Berlin Wall, but Lucas was not a fan.  When a reporter asked, Lucas said that “Sachs advises Poland and John Taylor, a really good neoclassical economist, advises the United States - that’s about the right distribution of labor.”

Lucas was similarly acerbic about the Obama administration’s decisions in 2009.  Christina Romer, Obama’s leading economic advisor, promulgated policies unmoored from any economic model that Lucas respected.  It was “schlock economics,” he said. Romer was surely too busy to care, but Lucas’ criticism bothered Paul Krugman quite a bit.  Krugman is of course also a Nobelist and is also a long-time columnist for the New York Times, and his hatred for Lucas and his perceived “slander” of Romer was a staple of Krugman’s columns for years.

One of Krugman’s most famous columns was about how Lucas had led economics into the dark ages, one where old truths had been forgotten.

“As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth…. As memories of the Depression faded, economists fell back in love with the old, idealized vision of an economy in which rational individuals interact in perfect markets, this time gussied up with fancy equations. The renewed romance with the idealized market was, to be sure, partly a response to shifting political winds, partly a response to financial incentives. But while sabbaticals at the Hoover Institution and job opportunities on Wall Street are nothing to sneeze at, the central cause of the profession’s failure was the desire for an all-encompassing, intellectually elegant approach that also gave economists a chance to show off their mathematical prowess.”

Economics is as social as any other science, and probably even more politicized, and so Krugman was not wrong to imagine that economists gets swayed by what’s going on around them – though the same could be said of him, too.  More importantly, I think that Krugman’s too-much-math critique was off-base.  I’m confused a lot, but I’d be even more confused if Bob Lucas hadn’t gone to the trouble of explaining his ideas – both in math and in words – so elegantly.  

Lucas’ 1995 prize was part of an avalanche of Nobels awarded to Chicago economists in the 1990s.  The head of the Nobel Prize selection committee was for many years a Swede named Assar Lindbeck.  It is now common for European and American economists to trade seminar visits, but it was rare back then, and so I was surprised when Lindbeck showed up on the Fall 1988 schedule for Gary Becker’s seminar.  Why, I wondered to a fellow student, was Chicago going to the trouble of flying this man all the way in from Sweden?  “To butter him up for more prizes,” he said.

Chicago had a well-earned reputation for interrupting speakers with from the first slide, and the smartest interrupter was Kevin Murphy, a barely-older-than-me wunderkind who would immediately drill down to the weakest point of any speaker’s presentation.   Kevin was (and is) a genuinely nice person, but we graduate students viewed his interface with speakers rather like the Roman crowds looked at Christians being thrown to the lions.  Kevin raised his hand on Lindbeck’s second slide.

“I’m sorry, young man,” said Lindbeck. “But I always defer questions until the end of the seminar.”

“But you can’t defer the question,” said Kevin.

“Ah, young man,” said Lindbeck, “but I can.  This is my seminar.”

“But that’s not how we do things here,” said Kevin, looking plaintively at Becker.  “This is Chicago. This is our seminar.”

“Well, young man,” said Lindbeck, “that’s not my policy.”

It was an awkward moment. The senior professors looked back and forth between Kevin and Lindbeck, and the students, standing in the back, shifted from leg to leg. What would Becker do?  Would he stand up for Chicago’s seminar culture, for his protégé, or would he suck up to the man in charge of awarding Nobels?

“Uh-um,” said Becker, clearing his throat. “We do typically have, er, a robust conversation in this seminar.  But because Assar has come from so far away, let’s save our questions for the last five minutes.”

I sat quietly in the back of the seminar room with my mouth agape as Lindbeck went through the rest of his talk without interruptions.  Chicago economists won four out of the next five Nobel prizes, starting with Becker’s in 1990 and ending with Lucas’ in 1995.  I cannot say with certainty, but perhaps Chicago’s Nobel run was broken when MIT and Harvard also figured out how to butter up the committee.  I’m still a big fan of Gary Becker, but this event reminds me that we all make compromises.

About the same time a Dutch economist published a book based on interviews with graduate students at some of the elite American economics graduate schools – MIT and Harvard, but Chicago, too.  Chicago economists loved the book because it made us seem more serious and less cynical than students at those other schools.  Unlike them, we thought that economics was not just jockeying for plum jobs at elite schools and the IMF, that economics actually had something to say to policymakers and the real world, that it was not all a game.  We also thought that it was economic models, grounded in both observation and disciplined mathematical reasoning, that made economics valuable.

You might think we were idiots for thinking that way, that academics in general and economics in particular is purely internal politics and score-settling, that prizes are won and tenure awarded solely on the basis of who you know.  You might say that it’s all a zero-sum game, or worse, that it’s a waste of intellectual resources that could be put to better use solving problems in, say, health care and management.  You wouldn’t be all wrong, of course, but I still think, after all these years, that economics matters, that the best ideas tend to vanquish the worst, and that most economic reasoning should happen within the confines of mathematical models of the sort that Robert Lucas developed and advocated for.  So Paul Krugman was quite wrong to criticize Lucas for falling in love with math, with logic, because without it we’d all be even more confused.