The Journal of Political Economy has awarded the inaugural Robert E. Lucas, Jr. Prize to Boyan Jovanovic and Peter L. Rousseau, for “Extensive and Intensive Investment over the Business Cycle” (JPE 122[4]: 863-908). Their paper empirically shows that extensive investment (i.e., creation of new firms) rises with aggregate Tobin's Q, while intensive investment (i.e., investment of established firms) falls, and provides a helpful model for understanding this novel fact. A more rapid technological change makes it harder to adapt existing capital. This raises Q and thereby provides new entrants with a comparative advantage. The paper therefore makes a substantial contribution to understanding the dynamic economics of technological change and investment choices. The award was established last year to commemorate the occasion of Lucas’ receiving the Phoenix Prize, celebrating his seminal contributions to economics. It is awarded biannually for "the most interesting paper in the area of Dynamic Economics" published in the Journal of Political Economy in the preceding two years.

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