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Finally, in section five, Lucas examines models that explore business-cycle risks that aren t evenly distributed or easily diversified, causing welfare cost estimates to badly underestimate the costs of fluctuations. To conclude his article, Lucas emphasizes again the results of his theory.  The potential gains from improved stabilization policies are on the order of hundredths of a percent of consumption, perhaps two orders of magnitude smaller than the potential benefits of available  supply-side fiscal reforms. # The Lucas article has its importance in Macroeconomics, because it deals with the origins of Macroeconomics, and the direction it needs to take at the present and into the future. Macroeconomics was formed to solve the problems with the Great Depression, but as with most things, Macroeconomics has to adjust with changing times, and it appears the time is now to change its focus toward growth instead of reducing risk. Lucas does admit his article and research has potential flaws.  My plan was to go down a list of all the things that could have gone wrong with my 1987 calculations but, as I should have anticipated, possibilities were added to the list faster than I could eliminate them. # This is not the first thing you want to read when reading about other directions of research and possible sources of error. However, despite making such a huge statement against his research, I believe overall Lucas makes a strong argument CHNKWKS BøÿÿÿÿTEXTTEXT4/FDPPFDPP2FDPCFDPC4STSHSTSH6STSHSTSH62SYIDSYIDP6SGP SGP h6INK INK l6BTEPPLC p6BTECPLC ˆ6FONTFONT 6<FTN FTN Ü6ŽFTN FTN ²7ŽTOKNPLC j74STRSPLC @8HPRNTWNPRˆ8hFRAMFRAMð@ˆTITLTITLxADOP DOP Aworthless toI chose to review  Macroeconomic Priorities , by Robert E. Lucas, Jr. This article appeared in the American Economic Review of March 2003. The article argues that  the potential from better long-run, supply-side policies exceeds by far the potential from further improvements in short-run demand management. # Simplifying it, he argues that Macroeconomics, which originated as a response to the Great Depression, has solved its problem of the recurrence of another economic disaster similar to the Great Depression, and should now switch its focus to economic growth. He uses five sections to explain why the original problem has been solved, and why focusing on economic growth would be a good thing. The first section focuses on general welfare analysis, and Lucas comes to the conclusion that  & large potential gains from further improvements in long-run fiscal policy exist.# The second section focuses on a single consumer relieved of consumption variability about trend. His conclusion is that removing risk would result in only a .05% increase in consumption.  Compared to the examples of welfare gains from fiscal and monetary policy changes that I cited above, this estimate seems trivially small: more than an order of magnitude smaller than the gain from ending a 10-percent inflation! # That quote again emphasizes the fact that focusing on growth instead of risk reduction would be best for Macroeconomics. Moving on to the third section, dealing with aggregate consumption variability, he concludes that monetary and fiscal means shouldn t, and probably couldn t, be used to remove the 30 percent cyclical variability observed in postwar America. Section four,  Risk Aversion , deals with how much people dislike consumption uncertainty.  The great contribution of throughout the rest of his article supporting his research that this statement doesn t ruin the rest of the article, which is probably the reason he made this statement in the first place. At least Lucas was trying to be honest about the results of his research, acknowledging that  these are hard questions, and definitive answers are too much to ask for. # Coming up with exact answers for changing the focus of Macroeconomic research is probably an impossible task, and Lucas acknowledges that. However, I believe, as well as Lucas does, that his research provides enough evidence that reducing risk doesn t provide enough benefit to continue this kind of research, and that growth provides much more potential for impact on an economy. My hardest part about reading this article is that he takes examples and references from 60 different sources, and doesn t have enough space in a 15-page article to expand or explain each model or research he is talking about in this article. With that being said, if he had to explain how each source proved its theory, it would take him a lot of pages to accomplish this, which is why he probably states the results of various research, and leaves it to the reader to explore how accurate other people s research was. However, I didn t have the time to explore the accuracy of the research he built around, and that would be my main area of doubt with his article. Otherwise, I believe he wrote a very readable article, and an article which has great importance to the Macroeconomic community -- which is probably why it led off the American Economic Review for March 2003. Also, searching the internet for various information about his article, I found many web sites post his article, showing their belief in what Robert E. Lucas, Jr. says in this article, and I found several places discussing what Lucas wrote and how it fits into Macroeconomics today. Therefore, I believe I chose an important article to review, and an article which might start a new wave of Macroeconomics research into the future. 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