James Tobin (1918–2002)

Who They Were

James Tobin (1918-2002) was an American economist and one of the leading Keynesian thinkers of the postwar era. He spent most of his career at Yale University and, in the early 1960s, served on President Kennedy's Council of Economic Advisers, contributing to the activist macroeconomic policy of that period. His research bridged monetary economics and finance, examining how households and institutions allocate their wealth across money and other assets and how those decisions connect to spending, employment and prices in the wider economy. In 1981 he received the Nobel Memorial Prize in Economic Sciences for his analysis of financial markets and their relations to expenditure decisions, employment, production and prices. Widely respected as a teacher and public economist, he remained an influential voice in debates over macroeconomic policy throughout his life.

Key Contributions

Tobin is closely associated with portfolio theory in monetary economics, which analyses how investors, facing risk, spread their holdings across money and riskier assets rather than concentrating in a single one; this provided microfoundations for the demand for money and linked financial markets to the real economy. His name is attached to Tobin's q, the ratio of the market value of a firm's assets to their replacement cost, used to think about incentives to invest. He also proposed a small tax on international currency transactions, later widely known as the Tobin tax, to dampen short-term speculation, and his statistical work gave rise to the Tobit model for outcomes that are limited or censored. In 1981 he received the Nobel Memorial Prize for his analysis of financial markets and their relation to spending, employment, production and prices.

On EconRecall

American Keynesian economist and 1981 Nobel laureate known for portfolio theory and his analysis of financial markets. Play the games that feature James Tobin:

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