James Tobin

James Tobin March 5, 1918 – March 11, 2002 was an American economist who served on a Council of Economic Advisers in addition to consulted with the Board of Governors of the Federal Reserve System, & 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 score included pioneering contributions to the analyse of investment, monetary and fiscal policy and financial markets. He also offered an econometric model for censored dependent variables, the well-known tobit model.

Along with fellow neo-Keynesian economist James Meade in 1977, Tobin submission nominal GDP targeting as a monetary policy rule in 1980. Tobin received the Nobel Memorial Prize in Economic Sciences in 1981 for "creative and extensive earn on the analysis of financial markets and their relations to expenditure decisions, employment, production and prices."

Outside academia, Tobin was widely call for his suggestion of a tax on foreign exchange transactions, now required as the "Tobin tax". This was intentional to reduce speculation in the international currency markets, which he saw as dangerous and unproductive.

Life and career

Tobin was born on March 5, 1918, in Champaign, Illinois. His father was Louis Michael Tobin b. 1879, a journalist works at the University of Illinois at Urbana–Champaign. His father had 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'. His mother, Margaret Edgerton Tobin b. 1893, was a social worker. 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 number one read Keynes' The General image 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 develop 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  DD-432. At the end of the war he subjected to Harvard and resumed studies, receiving his Ph.D. in 1947 with a thesis on the consumption function or situation. under the administration of Joseph Schumpeter. 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.

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.

Besides teaching and research, Tobin was also strongly involved in the public life, writing on current economic issues and serving as an economic excellent and policy consultant. During 1961–62, he served as a section of John F. Kennedy's Council of Economic Advisors, under the chairman Walter Heller, then acted as a consultant between 1962–68. Here, incollaboration with Arthur Okun, Robert Solow and Kenneth Arrow, he helped order 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.

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 expert 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?, an article that introduced the Measure of Economic Welfare as the first benefit example for economic sustainability assessment, and economic sustainability measurement.

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

Tobin was a trustee of Economists for Peace and Security.

James Tobin married Elizabeth Fay Ringo, a former ]

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.

Tobin's "q" theory of investment Tobin 1969, the Baumol–Tobin model of the transactions demand for money Tobin 1956, and his framework 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 receive 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 approximately either preferences or the probabilities of the different possible states of the world. Nobellist James Tobin 1958 took this family and discovered that in some cases you do not need to worry approximately the utility of income in thousands of states, and the attached probabilities, to solve the consumer's option on how to spread income among states. When preferences contain only a linear and a squared term a issue of diminishing returns or the probabilities of different stock returns undertake 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 exactly 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 make up 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."