Kellogg World Alumni Magazine, Winter 2001Kellogg School of Management
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Prof. Deborah Lucas  
Professor Deborah Lucas  

Research: Deborah Lucas, Finance

Capitol spending

Kellogg Finance Professor Deborah Lucas is helping Congress figure its bills

These days, when Kellogg Professor Deborah Lucas ponders issues in finance, the questions are no longer academic.

Indeed, her answers to inquiries such as “How much will it cost to reform Social Security?” and “Should the government subsidize prescription drugs?” will help shape the way these very issues will be handled in the future.

Lucas, the Donald C. Clark/Household International Distinguished Professor of Finance, has been on leave from Kellogg the past two years to work as chief economist for the Congressional Budget Office in Washington, D.C.

The agency is the chief number-cruncher for the nation’s lawmakers. When new legislation is proposed and officials ask “How much will it cost?” Lucas and her colleagues are the ones charged with figuring the bill.

“This is a great agency to work at because the emphasis is on providing unbiased facts about program costs that are essential for rational decision-making,” says Lucas, who will return to Kellogg in the spring to teach but will also continue to work in the CBO.

Lucas helps to oversee much of the agency’s research agenda, which is undertaken by the approximately 80 economists on the staff. She is also involved in a number of special studies.

Among them is an investigation into the extent to which Freddie Mac and Fannie Mae are subsidized by taxpayers. Lucas found that the government-chartered firms benefit by $10.6 billion a year, $3.9 billion of which is retained by the companies for themselves and their shareholders. The agencies, which help provide money for home mortgages, disputed the results of the study. “It was an interesting and controversial calculation,” Lucas says.

It’s a return trip to Washington for Lucas, who has long had an interest in public policy. From 1992 to 1993, she worked for the Council of Economic Advisers, covering macroeconomics and finance for the Clinton administration. Among the high-profile issues she addressed was the administration’s controversial proposal for health-care reform.

This time around, Lucas is continuing to work on social issues. One of her top priorities is to further the development of a large-scale model that views the challenges of an aging population in a “more holistic way” than government agencies have done in the past. This model will take into account Social Security, Medicare and other programs for the elderly, and analyze their impact on the nation’s economy.

Lucas is among many professors across the country who take periodic breaks from academia to work in the public

sector. She finds her skills are in great demand in Washington. “People really care about the answers you are providing,” she says. “It’s very satisfying because they really want to know what it will cost, say, to privatize Amtrak.”

Even so, Lucas looks forward to returning to Kellogg, where she focuses her teaching on fixed income securities and “turbo” finance, and her research on dynamic asset-pricing models.

“Working with the government actually gives you a renewed appreciation for the types of skills you learn at Kellogg,” she says. “It makes me feel like what I teach is essential.”

-- Rebecca Lindell

©2001 Kellogg School of Management, Northwestern University