The Lucas critique is valid, but the Lucas solution developed by mainstream macroeconomics represents an abject failure. Heroic aggregation assumptions are embodied in the creation of a representative agent: even if individual preferences could be taken as well-defined, exogenous, and stable over time, the celebrated Sonnenschein-Debreu-Mantel results show that microeconomic rationality imposes only very weak constraints on the properties of aggregate excess demand functions. Using simple examples, this chapter illustrates how restrictive assumptions are needed to ensure the existence of a representative agent and discusses the implausibility of these conditions being approximately satisfied. The chapter also questions the utility function of the representative agent as the basis for welfare analysis. Although supposedly ‘natural’ and ‘objective’, this approach imparts a systematic bias against the poor and in favor of the rich. As a corollary, moreover, changes in the distribution of income renders the representative agent’s utility function unstable; the Lucas solution is subject to a Lucas critique.

Chapter 11 is the second of three chapters reflecting on the rise of economic expertise during the twentieth century. It utilizes the famous Lucas critique of econometric models to explore the role and position of the economic expert and economist. It demonstrates how central Tinbergen’s decision models were for the Lucas critique, which was framed completely in Tinbergen’s terms. The critique was mostly justified since the models of Tinbergen implicitly relied on an asymmetry between the policymaker making decisions and other economic actors making decisions. That asymmetry is mirrored in Tinbergen’s perspective on public and expert knowledge, and the role of experts in a democratic society. Lucas correctly identified a crucial tension between democratic ideals and expert decision-making, but he also incorrectly equated changes in decision variables with changes in the institutional structure of the economy, and therefore made the world (too) flat. In conclusion, it is useful to distinguish between the economist concerned with the comparison of alternative institutional arrangements and the economic expert concerned with policy decisions. Both strands are shown to be present in Tinbergen’s work, who at times wrote as economist about institutional design and at times as policy expert about optimal policies.