Abstract: RECENTLY the rational expectations school has mounted an attack on the conventional use of simultaneous equations models for policy analysis.One might go further and say that among academic macroeconomists the conventional methods have not just been attacked, they have been discredited.The practice of using econometric models to project the likely effects of different policy choices, then choosing the best from among the projected outcomes, is widely believed to be unjustifiable or even the primary source of recent problems of combined high inflation and low economic activity.Instead, it is claimed, policy analysis should be formulated as choice among rules of behavior for the policy authorities and estimates should be made of the stochastic properties of the economy under each proposed rule to choose the best.This point of view has gained such wide acceptance in part because of its association with Lucas's theoretical demonstration that a Phillips curve could emerge in an economy in which such an association between inflation and real activity was not a usable menu for policy choice.Because users of conventional simultaneous equations models sometimes presented the Phillips curve as just such a menu, and because it became apparent in the 1970s that this menu was not helpful, an analysis that provided a cogent explanation for why the menu was chimerical had great appeal.As in most revolutions, the old regime toppled by the rational expectations revolution was corrupt and in some sense deserved its fate.However, as is often the case, the revolution itself has had its excesses, destroying or discarding much that was valuable in the name of utopian