Yakima Native Wins Nobel Prize

A University of Chicago professor won the Nobel Prize in economics Tuesday for demonstrating how people’s fears and expectations can frustrate policymakers’ efforts to shape the economy.

Robert E. Lucas’ work is now part of the “standard toolbox” of all economists, said the Royal Swedish Academy of Sciences in Stockholm.

Lucas, 58, who was born in Yakima, found that government attempts to regulate unemployment and investment by regulating the national money supply often are undermined by the way people adjust their spending and other behavior.

For instance, if the Federal Reserve raises interest rates to slow economic growth and prevent inflation, people might stop taking out loans and making major purchases. That, in turn, could cause a recession and force the Fed to cut rates.

“Models that we thought were guiding the fine-tuning of the economy through monetary and fiscal policy are more or less useless,” Lucas said after winning the prize. “Those models presumed a lot of stupidity on the part of the ordinary citizen.”