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

economist An economist is a professional and practitioner in the social sciences, social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy. Within this ...

who served on the

Council of Economic Advisers The Council of Economic Advisers (CEA) is a United States agency within the Executive Office of the President established in 1946, which advises the president of the United States on economic policy. The CEA provides much of the empirical resea ...

and consulted with the

Board of Governors A board of directors is a governing body that supervises the activities of a business, a nonprofit organization, or a government agency. The powers, duties, and responsibilities of a board of directors are determined by government regulations ...

of the

Federal Reserve System The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a series of ...

, and taught at

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

and

Yale Yale University is a private Ivy League research university in New Haven, Connecticut, United States. Founded in 1701, Yale is the third-oldest institution of higher education in the United States, and one of the nine colonial colleges ch ...

Universities. He contributed to the development of key ideas in the

Keynesian economics Keynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomics, macroeconomic theories and Economic model, models of how aggregate demand (total spending in the economy) strongl ...

of his generation and advocated

government intervention A market intervention is a policy or measure that modifies or interferes with a market, typically done in the form of state action, but also by philanthropic and political-action groups. Market interventions can be done for a number of reas ...

in particular to stabilize output and avoid

recession In economics, a recession is a business cycle contraction that occurs when there is a period of broad decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be tr ...

s. His academic work included pioneering contributions to the study of

investment Investment is traditionally defined as the "commitment of resources into something expected to gain value over time". If an investment involves money, then it can be defined as a "commitment of money to receive more money later". From a broade ...

, monetary and

fiscal policy In economics and political science, fiscal policy is the use of government revenue collection ( taxes or tax cuts) and expenditure to influence a country's economy. The use of government revenue expenditures to influence macroeconomic variab ...

and financial markets. He also proposed an

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

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 (), commonly referred to as the Nobel Prize in Economics(), is an award in the field of economic sciences adminis ...

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 mandatory financial charge or levy imposed on an individual or legal entity by a governmental organization to support government spending and public expenditures collectively or to regulate and reduce negative externalities. Tax co ...

on foreign exchange transactions, now known as the " Tobin tax." This was designed to reduce

speculation In finance, speculation is the purchase of an asset (a commodity, good (economics), goods, or real estate) with the hope that it will become more valuable in a brief amount of time. It can also refer to short sales in which the speculator hope ...

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. By trading volume, ...

s, which he saw as dangerous and unproductive.

Life and career

Early life

Tobin 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 List of municipalities in Illinois, tenth-most populous municipality in Illinois and the fourth most populous city in ...

. His father was Louis Michael Tobin (b. 1879), a journalist working at the

University of Illinois at Urbana–Champaign The University of Illinois Urbana-Champaign (UIUC, U of I, Illinois, or University of Illinois) is a public land-grant research university in the Champaign–Urbana metropolitan area, Illinois, United States. Established in 1867, it is the f ...

. His father had fought in

World War I World War I or the First World War (28 July 1914 – 11 November 1918), also known as the Great War, was a World war, global conflict between two coalitions: the Allies of World War I, Allies (or Entente) and the Central Powers. Fighting to ...

, was a member of the first

Greek Greek may refer to: 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 of all kno ...

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 attended the University Laboratory High School of Urbana, Illinois, 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 experimentatio ...

in the university's campus.Tobin, James. "Autobiography"
published in ''Nobel Lectures. Economics 1981–1990'', Editor Karl-Göran Mäler, World Scientific Publishing Co., Singapore, 1992 In 1935, on his father's advice, Tobin took the entrance exams for

Harvard University Harvard University is a Private university, private Ivy League research university in Cambridge, Massachusetts, United States. Founded in 1636 and named for its first benefactor, the History of the Puritans in North America, Puritan clergyma ...

. 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' ''

The General Theory of Employment, Interest and Money ''The General Theory of Employment, Interest and Money'' is a book by English economist John Maynard Keynes published in February 1936. It caused a profound shift in economic thought, giving macroeconomics a central place in economic theory and ...

'', published in 1936. Tobin graduated ''

summa cum laude Latin honors are a system of Latin phrases used in some colleges and universities to indicate the level of distinction with which an academic degree has been earned. The system is primarily used in the United States. It is also used in some Sout ...

'' in 1939 with a thesis centered on a critical analysis of Keynes' mechanism for introducing equilibrium

involuntary unemployment Involuntary unemployment occurs when a person is unemployed despite being willing to work at the prevailing wage. It is distinguished from voluntary unemployment, where a person chooses not to work because their reservation wage is higher than the ...

. 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 and the

War Production Board The War Production Board (WPB) was an agency of the United States government that supervised war production during World War II. President Franklin D. Roosevelt established it in January 1942, with Executive Order 9024. The WPB replaced the Su ...

Washington, D.C. Washington, D.C., formally the District of Columbia and commonly known as Washington or D.C., is the capital city and federal district of the United States. The city is on the Potomac River, across from Virginia, and shares land borders with ...

The next year, after the United States entered

World War II World War II or the Second World War (1 September 1939 – 2 September 1945) was a World war, global conflict between two coalitions: the Allies of World War II, Allies and the Axis powers. World War II by country, Nearly all of the wo ...

, he enlisted in the

US Navy The United States Navy (USN) is the naval warfare, maritime military branch, service branch of the United States Department of Defense. It is the world's most powerful navy with the largest Displacement (ship), displacement, at 4.5 millio ...

, spending the war as an officer on destroyers including (among possibly 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 ...

written under the supervision of

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

. 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 Ivy League research university in New Haven, Connecticut, United States. Founded in 1701, Yale is the List of Colonial Colleges, third-oldest institution of higher education in the United Stat ...

, 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 Microfoundations are an effort to understand macroeconomic phenomena in terms of individual agents' economic behavior and interactions.Maarten Janssen (2008),Microfoundations, in ''The New Palgrave Dictionary of Economics'', 2nd ed. Research in mi ...

, with a special focus on

monetary economics Monetary economics is the branch of economics that studies the different theories of money: it provides a framework for analyzing money and considers its functions (as medium of exchange, store of value, and unit of account), and it considers how m ...

. 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's

, under the chairman Walter Heller, then acted as a consultant between 1962 and 1968. Here, in close collaboration with Arthur Okun,

Robert Solow Robert Merton Solow, GCIH (; August 23, 1924 – December 21, 2023) was an American economist who received the 1987 Nobel Memorial Prize in Economic Sciences, and whose work on the theory of economic growth culminated in the exogenous growth ...

and

Kenneth Arrow Kenneth Joseph Arrow (August 23, 1921 – February 21, 2017) was an American economist, mathematician and political theorist. He received the John Bates Clark Medal in 1957, and the Nobel Memorial Prize in Economic Sciences in 1972, along with ...

, 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

Academic Consultants and as a consultant of the

US Treasury Department The Department of the Treasury (USDT) is the national treasury and finance department of the federal government of the United States. It is one of 15 current U.S. government departments. The department oversees the Bureau of Engraving and ...

.James Tobin'
CV at the Cowles Foundation's website
/ref> Tobin was awarded the

John Bates Clark Medal The John Bates Clark Medal is awarded by the American Economic Association to "that American economist under the age of forty who is adjudged to have made a significant contribution to economic thought and knowledge." The award is named after the ...

in 1955 and, in 1981, the

Nobel Memorial Prize in Economics The Nobel Memorial Prize in Economic Sciences, officially the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (), commonly referred to as the Nobel Prize in Economics(), is an award in the field of economic sciences adminis ...

. He was a fellow of several professional associations, holding the position of president of the

American Economic Association The American Economic Association (AEA) is a learned society in the field of economics, with approximately 23,000 members. It publishes several peer-reviewed journals, including the Journal of Economic Literature, American Economic Review, an ...

in 1971. He was an elected member of the

American Academy of Arts and Sciences The American Academy of Arts and Sciences (The Academy) is one of the oldest learned societies in the United States. It was founded in 1780 during the American Revolution by John Adams, John Hancock, James Bowdoin, Andrew Oliver, and other ...

, the

American Philosophical Society The American Philosophical Society (APS) is an American scholarly organization and learned society founded in 1743 in Philadelphia that promotes knowledge in the humanities and natural sciences through research, professional meetings, publicat ...

, and the United States

National Academy of Sciences The National Academy of Sciences (NAS) is a United States nonprofit, NGO, non-governmental organization. NAS is part of the National Academies of Sciences, Engineering, and Medicine, along with the National Academy of Engineering (NAE) and the ...

. In 1972 Tobin, along with fellow Yale economics professor

William Nordhaus William Dawbney Nordhaus (born May 31, 1941) is an American economist. He was a Sterling Professor of Economics at Yale University, best known for his work in economic modeling and climate change, and a co-recipient of the 2018 Nobel Memorial ...

, published ''Is Growth Obsolete?'', an article that introduced the Measure of Economic Welfare as the first model for economic

sustainability Sustainability is a social goal for people to co-exist on Earth over a long period of time. Definitions of this term are disputed and have varied with literature, context, and time. Sustainability usually has three dimensions (or pillars): env ...

assessment, and economic

sustainability measurement Sustainability measurement is a set of frameworks or indicators used to measure how sustainable something is. This includes processes, products, services and businesses. Sustainability is difficult to quantify and it may even be impossible to mea ...

. 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 university, public Land-grant university, land-grant research university in Berkeley, California, United States. Founded in 1868 and named after t ...

. In 1988 he formally retired from Yale, but continued to deliver some lectures as

Professor Emeritus ''Emeritus/Emerita'' () is an honorary title granted to someone who retirement, retires from a position of distinction, most commonly an academic faculty position, but is allowed to continue using the previous title, as in "professor emeritus". ...

and continued to write. He died on March 11, 2002, in

New Haven, Connecticut New Haven is a city of the U.S. state of Connecticut. It is located on New Haven Harbor on the northern shore of Long Island Sound. With a population of 135,081 as determined by the 2020 United States census, 2020 U.S. census, New Haven is List ...

. 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.

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. 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 ''The New Palgrave Dictionary of Economics'' (2018), 3rd ed., is a twenty-volume reference work on economics published by Palgrave Macmillan. It contains around 3,000 entries, including many classic essays from the original Inglis Palgrave Dictio ...

''. 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