James Tobin
Encyclopedia
James Tobin was an American
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

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

 who, in his lifetime, served on the Council of Economic Advisors and the Board of Governors
Board of governors
Board of governors is a term sometimes applied to the board of directors of a public entity or non-profit organization.Many public institutions, such as public universities, are government-owned corporations. The British Broadcasting Corporation was managed by a board of governors, though this role...

 of the Federal Reserve System
Federal Reserve System
The Federal Reserve System is the central banking system of the United States. It was created on December 23, 1913 with the enactment of the Federal Reserve Act, largely in response to a series of financial panics, particularly a severe panic in 1907...

, and taught at Harvard and Yale
YALE
RapidMiner, formerly YALE , is an environment for machine learning, data mining, text mining, predictive analytics, and business analytics. It is used for research, education, training, rapid prototyping, application development, and industrial applications...

 Universities. He developed the ideas of Keynesian economics
Keynesian economics
Keynesian economics is a school of macroeconomic thought based on the ideas of 20th-century English economist John Maynard Keynes.Keynesian economics argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and, therefore, advocates active policy responses by the...

, and advocated government intervention to stabilize output and avoid recession
Recession
In economics, a recession is a business cycle contraction, a general slowdown in economic activity. During recessions, many macroeconomic indicators vary in a similar way...

s. His academic work included pioneering contributions to the study of investment
Investment
Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...

, monetary and fiscal policy
Fiscal policy
In economics and political science, fiscal policy is the use of government expenditure and revenue collection to influence the economy....

 and financial markets. He also proposed an econometric model
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 under study...

 for censored endogenous
Endogenous
Endogenous substances are those that originate from within an organism, tissue, or cell. Endogenous retroviruses are caused by ancient infections of germ cells in humans, mammals and other vertebrates...

 variables, the well known "Tobit model
Tobit model
The Tobit model is a statistical model proposed by James Tobin to describe the relationship between a non-negative dependent variable y_i and an independent variable x_i....

". Tobin received the Nobel Memorial Prize in Economic Sciences
Nobel Memorial Prize in Economic Sciences
The Nobel Memorial Prize in Economic Sciences, commonly referred to as the Nobel Prize in Economics, but officially the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel , is an award for outstanding contributions to the field of economics, generally regarded as one of the...

 in 1981.

Outside of academia, Tobin was widely known for his suggestion of a tax
Tax
To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...

 on foreign exchange
Foreign exchange market
The foreign exchange market is a global, worldwide decentralized financial market for trading currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends...

 transactions, now known as the "Tobin tax
Tobin tax
A Tobin tax, suggested by Nobel Laureate economist James Tobin, was originally defined as a tax on all spot conversions of one currency into another...

". This was designed to reduce speculation
Speculation
In finance, speculation is a financial action that does not promise safety of the initial investment along with the return on the principal sum...

 in the international currency markets, which he saw as dangerous and unproductive.

Early life

James Tobin was born on March 5, 1918 in Champaign, Illinois
Champaign, Illinois
Champaign is a city in Champaign County, Illinois, in the United States. The city is located south of Chicago, west of Indianapolis, Indiana, and 178 miles northeast of St. Louis, Missouri. Though surrounded by farm communities, Champaign is notable for sharing the campus of the University of...

. His father was Louis Michael Tobin, (b.1899) a journalist working at the University of Illinois at Urbana-Champaign
University of Illinois at Urbana-Champaign
The University of Illinois at Urbana–Champaign is a large public research-intensive university in the state of Illinois, United States. It is the flagship campus of the University of Illinois system...

. His father had fought in World War I
World War I
World War I , which was predominantly called the World War or the Great War from its occurrence until 1939, and the First World War or World War I thereafter, was a major war centred in Europe that began on 28 July 1914 and lasted until 11 November 1918...

, was a member of the first Greek
Fraternities and sororities
Fraternities and sororities are fraternal social organizations for undergraduate students. In Latin, the term refers mainly to such organizations at colleges and universities in the United States, although it is also applied to analogous European groups also known as corporations...

 Organization at Illinois (Delta Tau Delta
Delta Tau Delta
Delta Tau Delta is a U.S.-based international secret letter college fraternity. Delta Tau Delta was founded in 1858 at Bethany College, Bethany, Virginia, . It currently has around 125 student chapters nationwide, as well as more than 25 regional alumni groups. Its national community service...

 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
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, educational research, and professional...

 in the university's campus.

In 1935, on his father's advice, Tobin took the entrance exams for Harvard University
Harvard University
Harvard University is a private Ivy League university located in Cambridge, Massachusetts, United States, established in 1636 by the Massachusetts legislature. Harvard is the oldest institution of higher learning in the United States and the first corporation chartered in the country...

. Despite no special preparation for the exams, he passed and was admitted with a national scholarship from the university. Here he among the faculty he would meet Joseph Schumpeter
Joseph Schumpeter
Joseph Alois Schumpeter was an Austrian-Hungarian-American economist and political scientist. He popularized the term "creative destruction" in economics.-Life:...

, Alvin Hansen
Alvin Hansen
Alvin Harvey Hansen , often referred to as "the American Keynes," was a professor of economics at Harvard, a widely read author on current economic issues, and an influential advisor to the government who helped create the Council of Economic Advisors and the Social security system...

, Gottfried Haberler
Gottfried Haberler
Gottfried von Haberler was an economist. He worked in particular on international trade....

, Sumner Slichter
Sumner Slichter
Sumner Huber Slichter was an American economist and the first Lamont University Professor at Harvard University. Slichter was considered by many to be the pre-eminent labor economist of the 1940s and 1950s.-Education:...

, Seymour Harris, Edward Mason, Edward Chamberlin
Edward Chamberlin
Edward Hastings Chamberlin was an American economist. He was born in La Conner, Washington.Chamberlin studied first at the University of Iowa , then pursued graduate-level studies at the University of Michigan, eventually receiving his Ph.D...

, John Kenneth Galbraith
John Kenneth Galbraith
John Kenneth "Ken" Galbraith , OC was a Canadian-American economist. He was a Keynesian and an institutionalist, a leading proponent of 20th-century American liberalism...

 and Wassily Leontief
Wassily Leontief
Wassily Wassilyovich Leontief , was a Russian-American economist notable for his research on how changes in one economic sector may have an effect on other sectors. Leontief won the Nobel Committee's Nobel Memorial Prize in Economic Sciences in 1973, and three of his doctoral students have also...

. 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
Unemployment
Unemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...

. His first published article, in 1941, was based on this senior's thesis.

Tobin immediately started graduate studies, also at Harvard, earning his M.A.
Master's degree
A master's is an academic degree granted to individuals who have undergone study demonstrating a mastery or high-order overview of a specific field of study or area of professional practice...

 degree in 1940. His fellow graduate students included Paul Samuelson
Paul Samuelson
Paul Anthony Samuelson was an American economist, and the first American to win the Nobel Memorial Prize in Economic Sciences. The Swedish Royal Academies stated, when awarding the prize, that he "has done more than any other contemporary economist to raise the level of scientific analysis in...

, Lloyd Metzler
Lloyd Metzler
Lloyd Appleton Metzler was an American economist best known for his contributions to international trade theory. He was born at Lost Springs, Kansas in 1913. Although most of his career was spent at the University of Chicago, he was not a member of the Chicago school, but rather a Keynesian...

, Abram Bergson
Abram Bergson
Abram Bergson , born Abram Burk, was an American economist. He was born in New York City....

, Richard Musgrave
Richard Musgrave
Richard Abel Musgrave was an American economist of German heritage. His most cited work is The Theory of Public Finance , described as "the first English-language treatise in the field."-Life:...

 and Richard M. Goodwin
Richard M. Goodwin
Richard M. Goodwin was an American mathematician and economist. He was born in Indiana.Goodwin received his BA and PhD at Harvard, and he taught there from 1942 until 1950. He taught at the University of Cambridge until 1979 and the University of Siena until 1984.Goodwin worked on the interaction...

. In 1941, he interrupted graduate studies to work for the Office of Price Administration and Civilian Supply and the War Production Board
War Production Board
The War Production Board was established as a government agency on January 16, 1942 by executive order of Franklin D. Roosevelt.The purpose of the board was to regulate the production and allocation of materials and fuel during World War II in the United States...

 in Washington, D.C.
Washington, D.C.
Washington, D.C., formally the District of Columbia and commonly referred to as Washington, "the District", or simply D.C., is the capital of the United States. On July 16, 1790, the United States Congress approved the creation of a permanent national capital as permitted by the U.S. Constitution....

. The next year, after the United States entered World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...

, he enrolled in the US Navy, spending the war as an officer on a destroyer
Destroyer
In naval terminology, a destroyer is a fast and maneuverable yet long-endurance warship intended to escort larger vessels in a fleet, convoy or battle group and defend them against smaller, powerful, short-range attackers. Destroyers, originally called torpedo-boat destroyers in 1892, evolved from...

. 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
Consumption function
In economics, the consumption function is a single mathematical function used to express consumer spending. It was developed by John Maynard Keynes and detailed most famously in his book The General Theory of Employment, Interest, and Money. The function is used to calculate the amount of total...

 written under the supervision of Joseph Schumpeter
Joseph Schumpeter
Joseph Alois Schumpeter was an Austrian-Hungarian-American economist and political scientist. He popularized the term "creative destruction" in economics.-Life:...

. 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
Yale University is a private, Ivy League university located in New Haven, Connecticut, United States. Founded in 1701 in the Colony of Connecticut, the university is the third-oldest institution of higher education in the United States...

, where he remained for the rest of his career. He joined the Cowles Foundation
Cowles Foundation
The Cowles Commission for Research in Economics is an economic research institute, founded in Colorado Springs in 1932 by Alfred Cowles, a businessman and economist. In 1939, the Cowles Commission moved to the University of Chicago under the directorship of Theodore O. Yntema. Jacob Marschak took...

, 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
In economics, the term microfoundations refers to the microeconomic analysis of the behavior of individual agents such as households or firms that underpins a macroeconomic theory....

 to Keynesian economics
Keynesian economics
Keynesian economics is a school of macroeconomic thought based on the ideas of 20th-century English economist John Maynard Keynes.Keynesian economics argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and, therefore, advocates active policy responses by the...

, with a special focus on monetary economics. In 1957 he was appointed Sterling Professor
Sterling Professor
A Sterling Professorship is the highest academic rank at Yale University, awarded to a tenured faculty member considered one of the best in his or her field...

 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 F. Kennedy
John Fitzgerald "Jack" Kennedy , often referred to by his initials JFK, was the 35th President of the United States, serving from 1961 until his assassination in 1963....

's Council of Economic Advisors, under the chairman Walter Heller
Walter Heller
Walter Wolfgang Heller was a leading American economist of the 1960s, and an influential advisor to President John F. Kennedy as chairman of the Council of Economic Advisors, 1961-64....

, then acted as a consultant between 1962-68. Here, in close collaboration with Arthur Okun, Robert Solow
Robert Solow
Robert Merton Solow is an American economist particularly known for his work on the theory of economic growth that culminated in the exogenous growth model named after him...

 and Kenneth Arrow
Kenneth Arrow
Kenneth Joseph Arrow is an American economist and joint winner of the Nobel Memorial Prize in Economics with John Hicks in 1972. To date, he is the youngest person to have received this award, at 51....

, 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
Federal Reserve System
The Federal Reserve System is the central banking system of the United States. It was created on December 23, 1913 with the enactment of the Federal Reserve Act, largely in response to a series of financial panics, particularly a severe panic in 1907...

 Academic Consultants and as a consultant of the US Treasury Department
United States Department of the Treasury
The Department of the Treasury is an executive department and the treasury of the United States federal government. It was established by an Act of Congress in 1789 to manage government revenue...

.

Tobin was awarded the John Bates Clark Medal
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"...

 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
American Economic Association
The American Economic Association, or AEA, is a learned society in the field of economics, headquartered in Nashville, Tennessee. It publishes one of the most prestigious academic journals in economics: the American Economic Review...

 in 1971.

In 1972 Tobin, along with fellow Yale economics professor William Nordhaus
William Nordhaus
William Dawbney "Bill" Nordhaus is the Sterling Professor of Economics at Yale University. Nordhaus lives in New Haven, Connecticut, with his wife Barbara.-Career:...

, published Is Growth Obsolete?, an article that introduced the Measure of Economic Welfare as the first model for economic sustainability
Sustainability
Sustainability is the capacity to endure. For humans, sustainability is the long-term maintenance of well being, which has environmental, economic, and social dimensions, and encompasses the concept of union, an interdependent relationship and mutual responsible position with all living and non...

 assessment, and economic sustainability measurement
Sustainability measurement
Sustainability measurement is a term that denotes the measurements used as the quantitative basis for the informed management of sustainability...

.

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
New Haven, Connecticut
New Haven is the second-largest city in Connecticut and the sixth-largest in New England. According to the 2010 Census, New Haven's population increased by 5.0% between 2000 and 2010, a rate higher than that of the State of Connecticut, and higher than that of the state's five largest cities, and...

.

Tobin was a trustee of Economists for Peace and Security
Economists for Peace and Security
Economists for Peace and Security is a United Nations-registered, New York-based NGO which links economists interested in peace and security issues. Inspired by International Physicians for the Prevention of Nuclear War, it was founded in 1989 as Economists Against the Arms Race , before becoming...

.

Personal life

James Tobin married Elizabeth Fay Ringo, a former M.I.T.
Massachusetts Institute of Technology
The Massachusetts Institute of Technology is a private research university located in Cambridge, Massachusetts. MIT has five schools and one college, containing a total of 32 academic departments, with a strong emphasis on scientific and technological education and research.Founded in 1861 in...

 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
Round table (discussion)
Round table is a form of academic discussion. Participants agree on a specific topic to discuss and debate. Each person is given equal right to participate, because of the circular layout usually used in round table discussions....

 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
Tobin tax
A Tobin tax, suggested by Nobel Laureate economist James Tobin, was originally defined as a tax on all spot conversions of one currency into another...

” – 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
Baumol-Tobin model
The Baumol-Tobin model is an economic model of the transactions demand for money as developed independently by William Baumol and James Tobin . The theory relies on the trade off between the liquidity provided by holding money and the interest foregone by holding one’s assets in the form of...

 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.

Publications

  • Tobin, James (1956). "The Interest-Elasticity of Transactions Demand for Cash," Review of Economics and Statistics, 38(3), pp 241-247. }}
  • 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. 301-317.
  • 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
    The New Palgrave Dictionary of Economics
    The New Palgrave Dictionary of Economics , 2nd Edition, is an eight-volume reference work, edited by Steven N. Durlauf and Lawrence E. Blume. It contains 5.8 million words and spans 7,680 pages with 1,872 articles. Included are 1057 new articles and, from earlier, 80 essays that are designated as...

    . 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
    Basic income
    A basic income guarantee is a proposed system of social security, that regularly provides each citizen with a sum of money. In contrast to income redistribution between nations themselves, the phrase basic income defines payments to individuals rather than households, groups, or nations, in order...

  • Guaranteed minimum income
    Guaranteed minimum income
    Guaranteed minimum income is a system of social welfare provision that guarantees that all citizens or families have an income sufficient to live on, provided they meet certain conditions. Eligibility is typically determined by citizenship, a means test and either availability for the labour...

  • Q Ratio (Tobin's Q ratio)
  • Tobit model (Tobin's model for censored endogenous variables)
    Tobit model
    The Tobit model is a statistical model proposed by James Tobin to describe the relationship between a non-negative dependent variable y_i and an independent variable x_i....

  • Tobin tax
    Tobin tax
    A Tobin tax, suggested by Nobel Laureate economist James Tobin, was originally defined as a tax on all spot conversions of one currency into another...


External links
The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
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