James Tobin

The American economist and the 1981 Economics Nobel Laureate, James Tobin (1918 – 2002) is known for promoting and elaborating the concepts of Keynesian economics. According to James Tobin, government interference is necessary in the economic activities of a nation, in order to increase and maintain the production levels and abstain from economic depressions as far as possible.

The American economist and the 1981 Economics Nobel Laureate, James Tobin (1918 – 2002) is known for promoting and elaborating the concepts of Keynesian economics. According to James Tobin, government interference is necessary in the economic activities of a nation, in order to increase and maintain the production levels and abstain from economic depressions as far as possible. In fact, Tobin almost spend his entire academic life for studying the money markets and its trends, fiscal and monetary policies and investments. [br]

Personal and career profiles:

Born on the 5th of March, 1918 at Champaign in Illinois, Tobin did his graduation from the Harvard University in 1939 with a national scholarship. The thesis which he submitted in course of his graduation was based on a critical analysis on the mechanism for introducing equilibrium, ‘Involuntary’ employment by Keynes. This thesis displayed the immense influence which Keynes’ General Theory of Employment, Interest and Money (1936) had on his teenage mind. In fact, the first published article of Tobin was based on Keynes’ thesis.

Tobin received his postgraduate (M.A.) degree in 1940, after which he joined the American navy during the Second World War. He acquired1947, his doctorate (Ph.D.) degree soon after the War in 1949, for his researches on Consumption Function. He was elected as the Junior Fellow of the Society of Fellows in Harvard University, which sponsored his studies and research works for the following 3 years.

Major works:

• The early research works of James Tobin offered theoretical supports to the macro-economic theories of Keynes. In fact, it was on the basis of this preliminary concepts about Keynesian macroeconomic theory that the concept of asset pricing and the contemporary theory of portfolio choice developed. He basically earned immense worldwide recognition and reputation for his articles, which highlighted the role of the flexibility of money-wage rate in the Keynesian theory. With time, he broadened the scope of choice for the utility of money for buying different types of assets. Side by side, he included and emphasized the buying of bonds, shares and real capital assets as coming under the horizon of the portfolios on which money could be used or spent. He also differentiated among individuals as risk averters, risk avoiders and risk takers.

Tobin also worked, to associate the decrease in the rates of interest to the ascending tendencies in the movement of the share prices. Thus, it may be concluded that Tobin’s theory of monetary policy established the relations existing between : [br]

• money and its interest rate
• rates of interest and q-ratio
• q-ratio and real investment Tobin in fact, re-established the function of monetary policy in the commercial world. It was the further analysis of the Keynesian theory by Tobin, which widened the area of operation of monetary policies.
• Tobin is also well-known for advocating an econometric model called the “Tobit Model”, for censored endogenous variables.

Some publications:

• Liquidity Preference as Behavior Towards Risk
• Private Values and Public Policy – essays in honor of William Fellner
• A Note on the Money Wage problem
• A Dynamic Aggregative Model
• A General Equilibrium Approach to Monetary Theory
• Asset Markets and the Cost of Capital

Books by James Tobin

• Asset Accumulation and Economic Activity: Reflections on Contemporary Macroeconomic Theory
• Macroeconomics, Prices, and Quantities Policies for Prosperity: Essays in a Keynesian Mode
• Essays in Economics, Vol. 1: Macroeconomics World Finance And Economic Stability: Selected Essays Of James Tobin
• Full Employment and Growth: Further Keynesian Essays on Policy
• Money, Credit and Capital

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