Should policy Be Active or Passive? Ignorance, expectations, the "Lucas Critique Robert lucas Expectations play a crucial role in the economy >Expectations depend on policies > Estimating the effect of a policy change requires knowing how people's expectations will respond > Traditional methods of policy evaluation do not adequately take into account this impact of policy on expectations 99 Should Policy Be Active or Passive? ⚫ Ignorance, expectations, & the “Lucas Critique” Robert Lucas Expectations play a crucial role in the economy → Expectations depend on policies → Estimating the effect of a policy change requires knowing how people’s expectations will respond → Traditional methods of policy evaluation do not adequately take into account this impact of policy on expectations