James Tobin

Lore & Background

Tobin was born on March 5, 1918, in Champaign, Illinois. His father was Louis Michael Tobin, a journalist working at the University of Illinois Urbana–Champaign and credited as the inventor of "Homecoming." His mother, Margaret Edgerton Tobin, was a social worker. Tobin attended the University Laboratory High School of Urbana, Illinois. In 1935, he was admitted to Harvard College with a national scholarship. He graduated summa cum laude in 1939 with a thesis centered on a critical analysis of Keynes' mechanism for introducing equilibrium involuntary unemployment. He earned his master degree at Harvard in 1940. In 1941, he worked for the Office of Price Administration and Civilian Supply and the War Production Board. In 1942 he enlisted in the US Navy, spending the war as an officer on destroyers including the USS Kearny. After the war he returned to Harvard, receiving his Ph.D. in 1947 with a thesis on the consumption function written under the supervision of Joseph Schumpeter. In 1947 Tobin was elected a Junior Fellow of Harvard's Society of Fellows. 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. In 1957 Tobin was appointed Sterling Professor of Economics at Yale. During 1961–62, he served as a member of John F. Kennedy's Council of Economic Advisers, then acted as a consultant between 1962 and 1968. 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. He was awarded the John Bates Clark Medal in 1955 and the Nobel Memorial Prize in Economics in 1981. He held the position of president of the American Economic Association in 1971. In 1972 Tobin, along with William Nordhaus, published Is Growth Obsolete?, an article that introduced the Measure of Economic Welfare. 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. He died on March 11, 2002, in New Haven, Connecticut. Tobin married Elizabeth Fay Ringo on September 14, 1946. They had four children.

Reader's Guide

Tobin's Tobit model of regression with censored endogenous variables is a standard econometric technique. His "q" theory of investment, the Baumol–Tobin model of the transactions demand for money, and his model of liquidity preference as behavior toward risk 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. Under Tobin's assumptions, a simple formulation of a person's investment choices becomes possible, allowing a tradeoff between risk and expected return.

Did You Know?

• Tobin proposed nominal GDP targeting as a monetary policy rule in 1980, along with fellow neo-Keynesian economist James Meade.
• The Tobin tax, a tax on foreign exchange transactions, was designed to reduce speculation in international currency markets.
• Tobin's first published article, in 1941, was based on his senior thesis at Harvard.
• Tobin served as a member of John F. Kennedy's Council of Economic Advisers during 1961–62.

Notable Quotes (Wikiquote)

"Tobin, James. "Liquidity preference as behavior towards risk." The review of economic studies (1958): 65-86." — James Tobin "Tobin, James. "Estimation of relationships for limited dependent variables." Econometrica: journal of the Econometric Society (1958): 24-36." — James Tobin "Journal of Money, Credit and Banking Vol. 1, No. 1 (Feb 1969) pp. 15-29." — James Tobin "I... set forth and illustrate a general framework for monetary analysis. It is not... new... but... shared... in spirit with many monetary economists. My purpose... is exposition and recapitulation." — James Tobin