James Tobin

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For other people named James Tobin, see James Tobin (disambiguation).
James Tobin
Nobel Prize in Economics (1981)
Information at IDEAS / RePEc

James Tobin (March 5, 1918 – March 11, 2002) was an American

government intervention in particular to stabilize output and avoid recessions. His academic work included pioneering contributions to the study of investment, monetary and fiscal policy and financial markets. He also proposed an econometric model for censored dependent variables, the well-known tobit model
.

Along with fellow

neo-Keynesian economist James Meade in 1977,[7][8] Tobin proposed nominal GDP targeting as a monetary policy rule in 1980.[9][10] Tobin received the Nobel Memorial Prize in Economic Sciences
in 1981 for "creative and extensive work on the analysis of financial markets and their relations to expenditure decisions, employment, production and prices."

Outside academia, Tobin was widely known for his suggestion of a

currency markets
, which he saw as dangerous and unproductive.

Life and career

Early life

Tobin

University Laboratory High School of Urbana, Illinois, a laboratory school
in the University's campus.

In 1935, on his father's advice, Tobin took the entrance exams for

summa cum laude in 1939 with a thesis centered on a critical analysis of Keynes' mechanism for introducing equilibrium involuntary unemployment. His first published article, in 1941, was based on this senior thesis.[12]

Tobin immediately started graduate studies, also at Harvard, earning his

Society of Fellows
, which allowed him the freedom and funding to spend the next three years studying and doing research.

Academic activity and consultancy

In 1950 Tobin moved to Yale University, where he remained for the rest of his career. He joined the Cowles Foundation, which moved to Yale in 1955, also serving as its president between 1955–1961 and 1964–1965. His main research interest was to provide microfoundations to Keynesian economics, with a special focus on monetary economics. One of his frequent collaborators was his Yale colleague William Brainard. In 1957 Tobin was appointed Sterling Professor of Economics at Yale.[15]

Besides teaching and research, Tobin was also strongly involved in the public life, writing on current economic issues and serving as an economic expert and policy consultant. During 1961–62, he served as a member of

Federal Reserve System Academic Consultants and as a consultant of the US Treasury Department.[16]

Tobin was awarded the

Nobel Memorial Prize in Economics. He was a fellow of several professional associations, holding the position of president of the American Economic Association in 1971. He was an elected member of the American Academy of Arts and Sciences, the American Philosophical Society, and the United States National Academy of Sciences.[17][18][19]

In 1972 Tobin, along with fellow Yale economics professor

Measure of Economic Welfare as the first model for economic sustainability assessment, and economic sustainability measurement
.

In 1982–1983, Tobin was Ford Visiting Research Professor of Economics at the

Professor Emeritus and continued to write. He died on March 11, 2002, in New Haven, Connecticut
.

Tobin was a trustee of Economists for Peace and Security.[22]

Personal life

James Tobin married Elizabeth Fay Ringo, a former M.I.T. student of Paul Samuelson, on September 14, 1946. They had four children: Margaret Ringo (born in 1948), Louis Michael (born in 1951), Hugh Ringo (born in 1953) and Roger Gill (born in 1956). In late June, 2009, the family announced via a private email that Tobin's wife had died at the age of 90.[citation needed]

Legacy

In August 2009 in a

Adair Turner supported the idea of new global taxes on financial transactions, warning that the "swollen" financial sector paying excessive salaries had grown too big for society. Lord Turner's suggestion that a "Tobin tax
" – named after James Tobin – should be considered for financial transactions made headlines around the world.

Tobin's Tobit model of regression with censored endogenous variables (Tobin 1958a) is a standard econometric technique. His "q" theory of investment (Tobin 1969), the Baumol–Tobin model of the transactions demand for money (Tobin 1956), and his model of liquidity preference as behavior toward risk (the asset demand for money) (Tobin 1958b) are all staples of economics textbooks.

In his 1958 article Tobin also led the way in showing how to deal with utility maximization under uncertainty with an infinite number of possible states. As Palda explains "One way to get out of the mess of figuring out asset prices using a model of maximizing the expected utility of investing in stocks is to make assumptions about either preferences or the probabilities of the different possible states of the world. Nobellist James Tobin (1958) took this line and discovered that in some cases you do not need to worry about the utility of income in thousands of states, and the attached probabilities, to solve the consumer's choice on how to spread income among states. When preferences contain only a linear and a squared term (a case of diminishing returns) or the probabilities of different stock returns follow a normal distribution (an equation that contains a linear and squared terms as parameters), a simple formulation of a person's investment choices becomes possible. Under Tobin's assumptions we can reformulate the person's decision problem as being one of trading off risk and expected return. Risk, or more precisely the variance of your investment portfolio creates spread in the returns you expect. People are willing to assume more risk only if compensated by a higher level of expected return. One can thus think of a tradeoff people are willing to make between risk and expected return. They invest in risky assets to the point at which their willingness to trade off risk and return is equal to the rate at which they able to trade them off. It is difficult to exaggerate how brilliant is the simplification of the investment problem that flows from these assumptions. Instead of worrying about the investor's optimization problem in potentially millions of possible states of the world, one need only worry about how the investor can trade off risk and return in the stock market."[23]

Publications

See also

References

  1. ^ Brainard, William. "Economic Growth and Long-term International Capital Movement". Retrieved January 23, 2023 – via ProQuest.
  2. ISBN 9781315780726
    .
  3. ^ Foley, Duncan. "Resource Allocation and the Public Sector". Retrieved January 23, 2023 – via ProQuest.
  4. ^ Hamada, Koichi. "Economic Growth and Long-term International Capital Movement". Retrieved January 23, 2023 – via ProQuest.
  5. ProQuest 288017476
    . Retrieved January 23, 2023 – via ProQuest.
  6. ISBN 9780521831062
    .
  7. JSTOR 2232044
  8. JSTOR 2118018
  9. JSTOR 2534285
  10. JSTOR 2534285
    .
  11. ^ Tobin, James. "Autobiography", published in Nobel Lectures. Economics 1981–1990, Editor Karl-Göran Mäler, World Scientific Publishing Co., Singapore, 1992
  12. ^ Solow Robert (2004). "James Tobin". Proceedings of the American Philosophical Society. 148 (3).
  13. ^ Reference to USS Kearny in c. 1965 letter to fellow shipmate Clitus H. Marvin
  14. ^ Tobin, James (1986). "James Tobin". In Breit, William; Spencer, Roger W. (eds.). Lives of the Laureates, Seven Nobel Economists. Cambridge, Massachusetts, London, England: The MIT Press. Archived from the original on August 26, 2003.
  15. ^ "Nobel Prize-winning economist James Tobin dies at 84". Yale Bulletin & Calendar. Vol. 30, no. 22. Yale Office of Public Affairs & Communications. 15 March 2002. Archived from the original on 2 April 2015. Retrieved 4 March 2015.
  16. ^ James Tobin's CV at the Cowles Foundation's website
  17. ^ "James Tobin". American Academy of Arts & Sciences. Retrieved 2022-12-08.
  18. ^ "APS Member History". search.amphilsoc.org. Retrieved 2022-12-08.
  19. ^ "James Tobin". www.nasonline.org. Retrieved 2022-12-08.
  20. ^ Nordhaus, W. and J. Tobin, 1972. Is growth obsolete?. Columbia University Press, New York.
  21. ^ Vane, Howard R.; Mulhearn, Chris (2005). The Nobel Memorial Laureates in Economics: An Introduction to Their Careers and Main Published Works. Edward Elgar Publishing. p. 121.
  22. ^ Economists for Peace and Security History Archived 2009-04-14 at the Wayback Machine: James Tobin among founding Nobel laureates
  23. ISBN 978-0987788047

External links

Wikiquote has quotations related to James Tobin.
Awards
Preceded by
Lawrence R. Klein
Laureate of the Nobel Memorial Prize in Economics

1981 		Succeeded by
George J. Stigler
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