James Tobin (March 5, 1918 – March 11, 2002) was an American economist who served on the Council of Economic Advisers and consulted with the

Board of Governors A board of directors (commonly referred simply as the board) is an executive committee that jointly supervises the activities of an organization, which can be either a for-profit or a nonprofit organization such as a business, nonprofit organi ...

of the Federal Reserve System, and taught at Harvard and

Yale Yale University is a private research university in New Haven, Connecticut. Established in 1701 as the Collegiate School, it is the third-oldest institution of higher education in the United States and among the most prestigious in the wor ...

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 Econometric models are statistical models used in econometrics. An econometric model specifies the statistical relationship that is believed to hold between the various economic quantities pertaining to a particular economic phenomenon. An econometr ...

for censored dependent variables, the well-known

tobit model In statistics, a tobit model is any of a class of regression models in which the observed range of the dependent variable is censored in some way. The term was coined by Arthur Goldberger in reference to James Tobin, who developed the model in 19 ...

. Along with fellow neo-Keynesian economist James Meade in 1977, Tobin proposed nominal GDP targeting as a monetary policy rule in 1980. Tobin received the

Nobel Memorial Prize in Economic Sciences The Nobel Memorial Prize in Economic Sciences, officially the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel ( sv, Sveriges riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne), is an economics award administered ...

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

tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or n ...

on foreign exchange transactions, now known as the "

Tobin tax A Tobin tax was originally defined as a tax on all spot conversions of one currency into another. It was suggested by James Tobin, an economist who won the Nobel Memorial Prize in Economic Sciences. Tobin's tax was originally intended to pen ...

". This was designed to reduce speculation in the international

currency market The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all aspe ...

s, which he saw as dangerous and unproductive.

Life and career

Early life

TobinTobin, James. "Autobiography"
published in ''Nobel Lectures. Economics 1981–1990'', Editor Karl-Göran Mäler, World Scientific Publishing Co., Singapore, 1992 was born on March 5, 1918, in

Champaign, Illinois Champaign ( ) is a city in Champaign County, Illinois, United States. The population was 88,302 at the 2020 census. It is the tenth-most populous municipality in Illinois and the fourth most populous city in Illinois outside the Chicago metro ...

. His father was Louis Michael Tobin (b. 1879), a journalist working at the University of Illinois at Urbana–Champaign. His father had fought in

World War I World War I (28 July 1914 11 November 1918), often abbreviated as WWI, was one of the deadliest global conflicts in history. Belligerents included much of Europe, the Russian Empire, the United States, and the Ottoman Empire, with fightin ...

, was a member of the first

Greek Greek may refer to: Greece Anything of, from, or related to Greece, a country in Southern Europe: *Greeks, an ethnic group. *Greek language, a branch of the Indo-European language family. **Proto-Greek language, the assumed last common ancestor ...

organization at Illinois (

Delta Tau Delta Delta Tau Delta () is a United States-based international Greek letter college fraternity. Delta Tau Delta was founded at Bethany College, Bethany, Virginia, (now West Virginia) in 1858. The fraternity currently has around 130 collegiate chapter ...

fraternity Beta Upsilon chapter), and was credited as the inventor of 'Homecoming'. His mother, Margaret Edgerton Tobin (b. 1893), was a social worker. Tobin followed primary school at the

University Laboratory High School of Urbana, Illinois The University of Illinois Laboratory High School, also known as Uni High or just Uni, was established in 1921 and is a laboratory school located on the engineering section of the University of Illinois campus in Urbana, Illinois. Its enrollme ...

, a

laboratory school A laboratory school or demonstration school is an elementary or secondary school operated in association with a university, college, or other teacher education institution and used for the training of future teachers, educational experimentation, ...

in the university's campus. In 1935, on his father's advice, Tobin took the entrance exams for

Harvard University Harvard University is a private Ivy League research university in Cambridge, Massachusetts. Founded in 1636 as Harvard College and named for its first benefactor, the Puritan clergyman John Harvard, it is the oldest institution of high ...

. 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 John Maynard Keynes, 1st Baron Keynes, ( ; 5 June 1883 – 21 April 1946), was an English economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments. Originally trained in m ...

' '' The 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 thesis. Tobin immediately started graduate studies, also at Harvard, earning his AM degree in 1940. In 1941, he interrupted graduate studies to work for the

Office of Price Administration and Civilian Supply The Office of Price Administration (OPA) was established within the Office for Emergency Management of the United States government by Executive Order 8875 on August 28, 1941. The functions of the OPA were originally to control money (price cont ...

and the War Production Board in Washington, D.C. The next year, after the United States entered

World War II World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposing ...

, he enlisted in the

US Navy The United States Navy (USN) is the maritime service branch of the United States Armed Forces and one of the eight uniformed services of the United States. It is the largest and most powerful navy in the world, with the estimated tonnage ...

, spending the war as an officer on a destroyer, including, among possible others, the . 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 In economics, the consumption function describes a relationship between consumption and disposable income. The concept is believed to have been introduced into macroeconomics by John Maynard Keynes in 1936, who used it to develop the notion of a ...

written under the supervision of

Joseph Schumpeter Joseph Alois Schumpeter (; February 8, 1883 – January 8, 1950) was an Austrian-born political economist. He served briefly as Finance Minister of German-Austria in 1919. In 1932, he emigrated to the United States to become a professor at H ...

. 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 Yale University is a Private university, private research university in New Haven, Connecticut. Established in 1701 as the Collegiate School, it is the List of Colonial Colleges, third-oldest institution of higher education in the United Sta ...

, 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. 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 John Fitzgerald Kennedy (May 29, 1917 – November 22, 1963), often referred to by his initials JFK and the nickname Jack, was an American politician who served as the 35th president of the United States from 1961 until his assassination ...

's Council of Economic Advisers, under the chairman Walter Heller, then acted as a consultant between 1962 and 1968. 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.James Tobin'
CV at the Cowles Foundation's website
/ref> 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. He was an elected member of the American Academy of Arts and Sciences, the

American Philosophical Society The American Philosophical Society (APS), founded in 1743 in Philadelphia, is a scholarly organization that promotes knowledge in the sciences and humanities through research, professional meetings, publications, library resources, and communit ...

, and the United States National Academy of Sciences. In 1972 Tobin, along with fellow Yale economics professor William Nordhaus, published ''Is Growth Obsolete?'', an article that introduced the

Measure of Economic Welfare The Index of Sustainable Economic Welfare (ISEW) is an economic indicator intended to replace the gross domestic product (GDP), which is the main macroeconomic indicator of System of National Accounts (SNA). Rather than simply adding together al ...

as the first model for economic sustainability assessment, and economic

sustainability measurement Sustainability measurement are tools and methods that attempt to measure the degree of sustainability of processes, products, services, businesses and so forth. Sustainability is difficult to quantify, perhaps even immeasurable. The metrics used to ...

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

University of California, Berkeley The University of California, Berkeley (UC Berkeley, Berkeley, Cal, or California) is a public land-grant research university in Berkeley, California. Established in 1868 as the University of California, it is the state's first land-grant u ...

. In 1988 he 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 New Haven is a city in the U.S. state of Connecticut. It is located on New Haven Harbor on the northern shore of Long Island Sound in New Haven County, Connecticut and is part of the New York City metropolitan area. With a population of 134 ...

. Tobin was a trustee of Economists for Peace and Security.

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 Jonathan Adair Turner, Baron Turner of Ecchinswell (born 5 October 1955) is a British businessman and academic and was Chairman of the Financial Services Authority until its abolition in March 2013. He is a former Chairman of the Pensions Commiss ...

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 "

" – 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."Palda, Filip (2013). ''The Apprentice Economist: Seven Steps to Mastery''. Ottawa: Cooper-Wolfling Press.

Publications

* * * also
Google Scholar
* * * 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 (1970). "Money and Income: Post Hoc Ergo Propter Hoc?" ''Quarterly Journal of Economics'', 84(2), pp
301–17.
* Tobin, James and William C. Brainard (1977a). "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. Reprinted in Tobin (1996), ''Essays in Economics'', v. 4, pp
139

163.
MIT Press. * Tobin, James, ''Essays in Economics'', MIT Press:
v. 1 (1987), ''Macroeconomics''. Scroll to chapter-previe
links.
br>v. 2 ''Consumption and Economics''
Description.
br>v. 3 (1987). ''Theory and Policy'' (in 1989 paperback as ''Policies for Prosperity: Essays in a Keynesian Mode'')
Description
an
links.
br>v. 4 (1996). ''National and International''.
Links.
* Tobin, James, with Stephen S. Golub (1998). ''Money, Credit, and Capital''. Irwin/McGraw-Hill

*

References

External links

James Tobin
at the Cowles Foundation site
Short biography at nobel-winners.com

John Mihaljevic's Equities and Tobin's Q Report

The Q Ratio Sends a Modestly Bearish Long-Term Signal (July 2009)

* ttp://www.businesswire.com/news/home/20081216005070/en 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"
* * *
James Tobin Papers.
Manuscripts and Archives, Yale University Library. * {{DEFAULTSORT:Tobin, James 1918 births 2002 deaths Economists from Illinois United States Navy personnel of World War II American Nobel laureates Harvard University alumni Nobel laureates in Economics People from Champaign, Illinois Scientists from New Haven, Connecticut United States Navy officers University Laboratory High School (Urbana, Illinois) alumni Yale University faculty Fellows of the American Statistical Association Neo-Keynesian economists 20th-century American writers 20th-century American economists Yale Sterling Professors Fellows of the Econometric Society Presidents of the Econometric Society Presidents of the American Economic Association Distinguished Fellows of the American Economic Association Social Science Research Council The Century Foundation Mathematicians from Illinois Members of the United States National Academy of Sciences Economists from Connecticut United States Council of Economic Advisers Members of the American Philosophical Society