The Lucas Critique: A Lucas Critique
Christian Müller-Kademann ()
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Christian Müller-Kademann: Jacobs University Bremen, Department of Economics and Business Administration, Germany
Economic Thought, 2018, vol. 7, issue 2, 54 - 62
The Lucas critique has been – and continues to be – the cornerstone of modern macroeconomic modelling. In this note we apply the Lucas critique to macroeconomic modelling using deep rational expectations. In conclusion, we point out that Lucas's critique reveals a fundamental flaw in Lucas's own, popular 'solution', i.e., the so-called forward-looking rational expectations models. Heeding Lucas's call for model-consistent policy advice eventually requires an ontological shift in economics – which throws the door wide open to an exciting, hardly-explored field of economic research.
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