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A Critique of Lucas’ Theory

In: Keynesian Economics and Price Theory

Author

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  • Masayuki Otaki

    (The University of Tokyo)

Abstract

Lucas Lucas ’ theory contains two theoretical problems that are not yet solved. One is whether he succeeds in deriving the objective cumulative density function (CDF) from an arbitrarily given subjective CDF. In this section it is shown that this question must be answered in the negative. Further, even though an individual can directly collect noisy information concerning the true state of an economy and not through the equilibrium price, it is still debatable whether the simplified signal extraction problem signal extraction problem is precisely formatted in his model. It is shown here that this procedure is also imprecise, and that it is necessary to provide an additional condition that completes the existence proof.

Suggested Citation

  • Masayuki Otaki, 2015. "A Critique of Lucas’ Theory," Advances in Japanese Business and Economics, in: Keynesian Economics and Price Theory, edition 127, chapter 14, pages 177-190, Springer.
    • Handle: RePEc:spr:advchp:978-4-431-55345-8_14
    DOI: 10.1007/978-4-431-55345-8_14
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