"My recollection is that Bob Lucas and Ed Prescott were initially very enthusiastic about rational expectations econometrics. After all, it simply involved imposing on ourselves the same high standards we had criticized the Keynesians for failing to live up to. But after about five years of doing likelihood ratio tests on rational expectations models, I recall Bob Lucas and Ed Prescott both telling me that those tests were rejecting too many good models."

“What policymakers should recognize, then, is that societies face a meaningful set of choices about alternative economic policy regimes.”

“It is paradoxical that an administration that came to office rejecting the whole apparatus of Keynesian economics finds itself presiding over a stream of what threaten to be permanent deficits.”

“Cagan’s adaptive mechanism for explaining expectations of inflation has sometimes been criticized as an ad hoc formulation that is inconsistent with the hypothesis that expectations are rational. In this paper, we have showed that conditions exist under which adaptive expectations are fully rational.”

“My published work is just a record of my learning. I'm sharing it with people so they won't make the same mistakes that I did. It's been a painful and slow process. My work is like a journey, a journey of discovery.”

“Economics is organized common sense. Here is a short list of valuable lessons that our beautiful subject teaches.”

“These ideas have implications not only for theoretical and econometric practices but also for the ways in which policymakers and their advisers think about the choices confronting them. In particular, the rational expectations approach directs attention away from particular isolated actions and toward choices among feasible rules of the game, or repeated strategies for choosing policy variables. While Keynesian and monetarists macroeconomic models have been used to try to analyze what the effects of isolated actions would be, it is now clear that the answers they have given have necessarily been bad, if only because such questions are ill-posed.”