Quickie: The Lucas Critique

Policy makers can only make the chances they want by considering the actions of individuals in the economy, not collectives or aggregates. In particular, taxation and monetary policy are especially prone to violating this principle.

"Given that the structure of an econometric model consists of optimal decision rules of economic agents, and that optimal decision rules vary systematically with changes in the structure of series relevant to the decision maker, it follows that any change in policy will systematically alter the structure of econometric models." —Robert Lucas

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