Macroeconomics was born as a distinct field in the 1940s, as a part of the intellectual response to the Great Depression. The term then referred to the body of knowledge and expertise that we hoped would prevent the recurrence of that economic disaster. My thesis in this lecture is that macroeconomics in this original sense has succeeded: Its central problem of depression-prevention has been solved, for all practical purposes, and has in fact been solved for many decades. (Lucas, 2003, Presidential Address to the American Economics Association)
“The problem is that the new theories, the theories embedded in general equilibrium dynamics […] don’t let us think about the US experience in the 1930s or about financial crises and their consequences […] We may be disillusioned with the Keynesian apparatus for thinking about these things, but it doesn’t mean that this replacement apparatus can do it either” (Lucas, 2003, Keynote Address to the 2003 HOPE Conference, p. 23, underline added)
So this is what we call “dynamic inconsistency”. You can only get away with it if you have a Nobel already, I guess. Still, this is weird. The message to the mainstream economists is: “Everything’s fine, don’t worry.” The message to the Keynesians is: “We still need the Keynesian models, the new ones can’t deal with depressions”. Was it a problem of courage? If not, what was that all about? If economists want to be considered scientists, this kind of behaviour does not help.