When Professor Jagdish Bhagwati of Columbia University generalized her point to include all of what he called "directly unproductive profit-seeking activities," it became a deep analysis of myriad tendencies to rigidity throughout modern societies-everything from quotas and licenses to taxes to bureaucratic regulation.
Meanwhile, others were approaching the same insights from slightly different directions. James Buchanan, Robert Tollison and Gordon Tullock produced a volume in 1980 called "Toward a Theory of the Rent-Seeking Society." Mancur Olson published "The Rise and Decline of Nations" in 1982. Douglass North published "Structure and Change in Economic History" in 1981.
All these very inventive books stressed the view that government did not stand outside of the economic process, and that various economic participants knew how to capture it in ways that were good for them but not necessarily good for others. The collective and pervasive quality of these impediments was memorably summed up by Steven Magee as constituting "the invisible foot," forever dragging against the efficiency that "the invisible hand" of competition was expected to produce.
Taken as a whole, the skein of thought known as neoclassical political economy provided an intellectual underpinning of sorts for the deregulation movement that would sweep the First and Third Worlds in the 1980s, for the turn away from communism that would rock the Second World at about the same time. Its reverberations are still rumbling through our times.
What Lucas had in mind when he spoke in 1985, however, was the other side of the coin-the good externalities that arose from propinquity and close association, that led to economic growth.
Generalized, Lucas' insights gave rise to aggregate models that suggested why some nations grew and others failed to grow, why citizens and capital migrated in one direction and not the other.
These were models that implied a somewhat gloomy prognosis: Locations that already had high levels of skill would tend to keep them; those that didn't would find it difficult to muscle into the game.
Lucas said all this in the Marshall lectures he delivered at Cambridge University in the spring of 1985, and thus was the attention of several key "invisible colleges" drawn decisively to the work of a few economists who had cut their teeth in the late 1970s-among them a mild-mannered young man from Colorado whose cogitations about the economics of science and technology had produced the model on which Lucas based the argument that lay at the heart of his lectures. Beating up intellectually on unions, lobbyists and bureaucrats had been a high flyer in the '80s. Now it would be asked to take a back seat to thinking about technology and trade.