James Tobin

James Tobin

Neo-Keynesian economics
Birth	March 5, 1918(1918-03-05) Champaign, Illinois, USA
Death	March 11, 2002(2002-03-11) (aged 84) New Haven, Connecticut, USA
Nationality	United States
Institution	Yale University Cowles Commission
Field	Macroeconomics
Alma mater	Harvard University
Influences	Keynes · Schumpeter · Hansen · Haberler · Slichter · Harris · Mason · Chamberlin · Leontief
Influenced	Samuelson · Metzler · Galbraith · Bergson · Musgrave · Goodwin · Krugman
Contributions	Portfolio theory Keynesian economics Tobin's q Tobit model
Awards	John Bates Clark Medal (1955) Nobel Prize in Economics (1981)
Information at IDEAS/RePEc

James Tobin (March 5, 1918 – March 11, 2002) was an American economist who in his lifetime, had served on the Council of Economic Advisors, the Board of Governors of the Federal Reserve System, and had taught at Harvard and Yale Universities. He developed the ideas of Keynesian economics, and advocated government intervention 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 endogenous variables, the well known "Tobit model". Tobin received the Nobel Memorial Prize in Economic Sciences in 1981.

Outside of academia, Tobin was widely known for his suggestion of a tax on foreign exchange transactions, now known as the "Tobin tax". This was designed to reduce speculation in the international currency markets, which he saw as dangerous and unproductive. He suggested that the proceeds of the tax could be used to fund projects for the benefit of Third World countries, or to support the United Nations.

Biography

Early life

James Tobin^[1] was born on March 5, 1918 in Champaign, Illinois. His father was Louis Michael Tobin, (b.1899) a journalist working at the University of Illinois at Urbana-Champaign who fought in World War I, was a member of the first Greek Organization at Illinois (Delta Tau Delta Fraternity Beta Upsilon Chapter), and was credited as the inventor of 'Homecoming'. Margaret Edgerton Tobin, (b.1893), a social worker, was his mother. Tobin followed primary school at the 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 Harvard University. Despite no special preparation for the exams, he passed and was admitted with a national scholarship from the university. During his studies he first read Keynes' General Theory of Employment, Interest and Money, published in 1936. Tobin graduated 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's thesis.^[2]

Tobin immediately started graduate studies, also at Harvard, earning his M.A. degree in 1940. Here he had among his professors Joseph Schumpeter, Alvin Hansen, Gottfried Haberler, Sumner Slichter, Seymour Harris, Edward Mason, Edward Chamberlin, and Wassily Leontief, while the graduate students included Paul Samuelson, Lloyd Metzler, John Kenneth Galbraith, Abram Bergson, Richard Musgrave and Richard M. Goodwin. In 1941, he interrupted graduate studies to work for the Office of Price Administration and Civilian Supply and the War Production Board in Washington, D.C.. The next year, after the United States entered World War II, he enrolled in the US Navy, spending the war as an officer on a destroyer. At the end of the war he returned to Harvard and resumed studies, receiving his Ph.D. in 1947 with a thesis on the consumption function written under the supervision of Joseph Schumpeter.^[3] In 1947 Tobin was elected a Junior Fellow of Harvard's 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. In 1957 he was appointed Sterling Professor at Yale.

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 John F. Kennedy's Council of Economic Advisors, under the chairman Walter Heller, then acted as a consultant between 1962-68. Here, in close collaboration with Arthur Okun, Robert Solow and Kenneth Arrow, he helped design the Keynesian economic policy implemented by the Kennedy administration. Tobin also served for several terms as a member of the Board of Governors of Federal Reserve System Academic Consultants and as a consultant of the US Treasury Department.^[4]

Tobin was awarded the John Bates Clark Medal in 1955 and, in 1981, 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.

In 1972 Tobin, along with fellow Yale economics professor William Nordhaus, published Is Growth Obsolete?,^[5] an article that introduced the Measure of Economic Welfare as the first model for economic sustainability assessment, and economic sustainability measurement.

In 1988 Tobin formally retired from Yale, but continued to deliver some lectures as 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.^[6]

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.

Legacy

In August 2009 in a roundtable interview in Prospect magazine, 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.

Publications

• Tobin, James (1941). "A note on the money wage problem". Quarterly Journal of Economics 55 (3): 508–516. doi:10.2307/1885642. http://www.jstor.org/stable/1885642. 
• Tobin, James (1955). "A Dynamic Aggregative Model". Journal of Political Economy 63.2: 103–15. doi:10.1086/257652. 
• Tobin, James (1956). "The Interest-Elasticity of Transactions Demand for Cash," Review of Economics and Statistics, 38(3), pp 241-247.
• Tobin, James (1958). "Liquidity Preference as Behavior Towards Risk". Review of Economic Studies 25.1: 65–86. 
• Tobin, James (1961). "Money, Capital, and Other Stores of Value," American Economic Review, 51(2), pp. 26-37. Reprinted in Tobin, 1987, Essays in Economics, v. 1, pp. 217-27. MIT Press.
• Tobin, James (1969). "A General Equilibrium Approach to Monetary Theory". Journal of Money, Credit, and Banking 1.1 (1): 15–29. 
• Tobin, James (1970). "Money and Income: Post Hoc Ergo Propter Hoc?" Quarterly Journal of Economics, 84(2), pp. 301-317.
• Tobin, James and William C. Brainard (1977). "Asset Markets and the Cost of Capital". In Richard Nelson and Bela Balassa, eds., Economic Progress: Private Values and Public Policy (Essays in Honor of William Fellner), Amsterdam: North-Holland, 235-62.
• Tobin, James (1992). “money,” The New Palgrave Dictionary of Finance and Money, v. 2, pp. 770–79 & in The New Palgrave Dictionary of Economics. 2008, 2nd Edition. Table of Contents and Abstract. Reprinted in Tobin (1996), Essays in Economics, v. 4, pp. 139-63. MIT Press.
• Tobin, James, Essays in Economics, MIT Press:
  v. 1 (1987), Macroeconomics. Scroll to chapter-preview links.
  v. 2 Consumption and Economics. Description.
  v. 3 (1987). Theory and Policy (in 1989 paperback as Policies for Prosperity: Essays in a Keynesian Mode). Description and links.
  v. 4 (1996). National and International. Links.
• Tobin, James, with Stephen S. Golub (1998). Money, Credit, and Capital. Irwin/McGraw-Hill. TOC.

See also

• Basic income
• Guaranteed minimum income
• Q Ratio (Tobin's Q ratio)
• Tobit model (Tobin's model for censored endogenous variables)
• Tobin tax

References

External links

• James Tobin at the Nobel Foundation e-Museum
• James Tobin at the Cowles Foundation site
• James Tobin at the HET site
• Short biography at nobel-winners.com
• IDEAS/RePEc
• John Mihaljevic's Equities and Tobin's Q Report
• The Q Ratio Sends a Modestly Bearish Long-Term Signal (July 2009)
• Tobin's Q Moderately Bullish on U.S. Equities (as of March 2009)
• The Manual of Ideas Launches Tobin's Q Research Service Based on James Tobin's Q Indicator
• Robert Huebscher on "The Market Valuation Q-uestion"