The conclusion that stabilization policies are effective anticipated by a quartercentury the thesis sustained by Robert Lucas in his presidential address in January 2003. Lucas offered a positive judgment on the economic policies of the postwar period based on advances in macroeconomic theory, both Keynesian and monetarist.
Countercyclical policies did stabilize the economy and prevent another large-scale depression, but more intensive recourse to these measures would not produce additional welfare gains; such gains can be attained by supply-side policies. In the classical tradition, Lucas stresses incomplete markets and the existence of rigidities and frictions that impede adjustment.