Lucas Islands game in intermediate macroeconomics

Abstract

The authors of this article demonstrate how Hazlett’s (1996) adaptation of the Lucas Islands model can be integrated into an intermediate macroeconomics course to strengthen student learning. In the classroom game, students act as workers making labor supply decisions under imperfect information about the aggregate price level, thus generating real-time data on forecasts and labor choices. A structured post-game lecture then uses these data to show how individual price-expectation errors produce a short-run supply relationship consistent with the Lucas supply curve. The instructor can use these results to connect theoretical predictions with empirical testing. The authors argue that this interactive approach is associated with greater confidence in macroeconomic modeling and self-reported understanding of theory while enhancing engagement with both theoretical and empirical aspects of macroeconomics.