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Three decades later, Eric Wieschaus, of Princeton University, and Christiane Nusslein-Volhard, of the Max Planck Institute for Developmental Biology in Tubingen, Germany, picked up on Lewis' work but focused instead on searching for the genes that initiate embryo development. Wieschaus and Nusslein-Volhard bred 40,000 fruit-fly families, each with a single defect. For more than a year, the two peered almost daily into a microscope, scrutinizing dead fly larvae and embryos. They found that most mutations had minor effects on development. But sometimes, says Wieschaus, "extraordinary things would happen. There would be no muscles, or the skin would become composed of nervous cells." By looking at what went wrong, the two scientists determined that of the fly's 20,000 genes, only 139 are absolutely essential for early development.
CHICAGO RULES In the midst of the 1970s recession, U.S. policymakers trying to revive the economy and stimulate job growth turned to one of their favorite tools: intervention. They pumped up federal spending and pushed down interest rates. According to conventional economic theory, inflation should have gone up and unemployment down--a trade-off that seemed worth the risk. What they got, however, was the worst of both worlds: high inflation and high joblessness--a phenomenon known as stagflation.
What happened? The answer--put forward by Robert Lucas, an economist at the University of Chicago--is the deceptively simple theory called "rational expectations," which earned Lucas this year's Nobel Prize for Economic Science.
Rational expectations, according to Lucas, is why government intervention so often fails. People remember the effects of past policies and quickly adjust their behavior in anticipation of what they think new policies are likely to do. In the case of the 1970s recession, Americans knew from experience that any attempt to pump up the economy would spur inflation and erode earnings. As a result, businesses immediately raised prices and workers demanded higher wages. Result: more inflation and continued high unemployment, the opposite of what policymakers had hoped for.
In the 1980s President Reagan made the same mistake. He promised that huge tax cuts would accelerate business activity and eliminate the budget deficit. Instead the economy stumbled, and the deficit rose to its highest level in history. Lucas' recommendation to policymakers: stop trying to fine-tune the economy.
Such intellectual brashness is typical of economists at the University of Chicago, whose emphasis on the theoretical has won them relatively few government appointments but more than their share of Nobel Prizes. The "Chicago boys" have won a total of eight economics Nobels, including five of the past six. "Around here," jokes Lucas, "the Nobel Prize doesn't carry much weight."