As was acknowledged by Lucas himself, an early statement of the Lucas critique is found in Marschak (1953). For an early application of the rational expectations hypothesis to finance, see Samuelson (1965). McCallum (1983b) presents a model of the liquidity trap and finds the rational expectations solution. The pre-REH literature on optimal stabilization policy is well surveyed by Turnovsky (1977, chs. 13-14). See also the classic analysis by Poole

(1970) on the optimal choice of policy instruments within the stochastic IS-LM model. For an early analysis of economic policy under rational expectations, see Fischer (1980b).

79 4

(t) F (N (t), K(t)) — w(t)N(t) — pI (t) [1 — si(t)](1 ler bliiimmicad Appends' , (I(t)), (4.1)

*where z(t) is real proui

:ion. 41 t ) is the 7 11111ti.. PC

'St function, with a __e same a , mum the simpiiticau, adj cost Anticipation Effects and Economic Policy The purpose of this chapter is to discuss the following issues: