Rational Expectations Wins Nobel Prize In Economics

(excerpt from 10/10/95 AP news report)

STOCKHOLM- University of Chicago professor Robert E. Lucas Jr. won the 1995 Nobel Prize in economics Tuesday (10/10/95) for groundbreaking research on the equilibrium theory of business cycles.

The Royal Swedish Academy of Sciences cited Lucas for his work on how people's expectations of the future effect economies. The citation said Lucas has had the greatest influence on macroeconomic research since 1970.

Lucas helped understand how "rational expectations" transform macroeconomic analysis. Macroeconomics is the relation of different aspects an economy- wages, supply and demand, inflation.

"The rational expectations hypothesis means that agents exploit available information without making systematic mistakes implied by earlier theories," the Swedish Academy said in its citation.

Lucas is the eighth Nobel economics laureate from the University of Chicago, which has had more winners that any other university in the world.

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