In the 1980s, there were occasions when it made sense to say, 'it is too difficult to maximize the likelihood function, and besides if we do, it will blow our model out of the water.'
There was a danger that skeptics and opponents would misread those likelihood ratio tests as rejections of an entire class of models, which of course they were not.
The first and most optimistic response was complete rational expectations econometrics. A rational expectations equilibrium is a likelihood function. Maximize it.
Lucas attended a conference on rational expectations at the University of Minnesota in the spring of 1973. The day after the conference, I received a call from Pittsburgh.
I wasn't the brightest kid, not by a long shot. I was interested in football, in girls, in getting my work done with the least amount of effort.
I think you've got to watch out for anybody in high school who says he wants to become an economist.
Keynes was a very good economist. He was brilliant. He had wonderful insights. His work has inspired me many times.
What I really don't like is oversimplification.
I'm happy to say I am a Harrison-Kreps-Keynesian.
