Changing the history of macroeconomics

The economists who support the rational expectations theory believe that people act to maximize their benefits (profits) or living standards. More than 20 years ago Lucas, as a Professor at the University of Chicago, showed how people respond to changes announced by the economic policy. This means that people modify their behavior according to the new policy. And this simple observation discharged the traditional analysis of the economic policy.

Curiously nowadays, university students, when taking their first course on Economics, are taught that if the government gives away free Corn Flakes, people will continue buying the same cereal, in the same amount as before, regardless of the economic policy. This theory is shown through a series of complicated algebraic formulas based on Keynes' ideas, for students fail to understand its meaning.

The Corn Flakes case happened in the U.S.A. Economists of the Federal Government were told to increase agricultural production. After months of research they found that the average North American family bought two boxes of Corn Flakes each month. The Government decided to give each family two boxes for free, expecting that their Corn Flakes intake would increase to four boxes a month.

Families stopped buying Corn Flakes. They changed their behavior and strategy, according to the new policy adopted by the Federal Government. According to Lucas, when reducing human action to simple statistic figures, errors of the Corn Flakes type happen. What economists see is a reflection of consumer strategies. While rules remain the same, it is expected that strategies don't change, but if the rules change, consumer strategies also change and it is impossible to make credible predictions.