James Tobin: An Appreciation of his Contribution to Economics
Willem H. Buiter
NBER Working Paper No. 9753
Issued in June 2003
NBER Program(s):International Finance and Macroeconomics, Monetary Economics
Jim Tobin, who died on March 11, 2002 at the age of 84, was one of giants of economics of the second half of the twentieth century and the greatest macroeconomist of his generation. Tobin's influence on macroeconomic theory is so pervasive - so much part of our professional 'acquis' - that many younger economists often are not even aware that it is his ideas they are elaborating, testing, criticising, refuting or re-inventing. In this Appreciation, I consider Tobin's scholarly contributions, made over a period of more than 50 years. Tobin received the 1981 Nobel Memorial Prize for his analysis of financial markets and their relations to expenditure decisions, employment, production and prices'. I consider his contributions to mean-variance portfolio demand and asset pricing theory, especially the Portfolio Separation Theorem; pitfalls in financial model building; portfolio balance and flow of funds models and the 'credit channel'; the life-cycle model and social security; econometric methodology, including the Tobit estimator and his pioneering work using both time series and cross-sectional data to estimate food demand functions; economic growth; Tobin's the 'Tobin Tax'; the monetary and fiscal policy effectiveness debate, first with Milton Friedman and then with the New Classical Macroeconomics and Real Business Cycle schools; and Tobin's approach to methodological questions including microfoundations and aggregation
Machine-readable bibliographic record - MARC, RIS, BibTeX
Document Object Identifier (DOI): 10.3386/w9753
Published: Buiter, Willem H. "James Tobin: An Appreciation Of His Contribution To Economics," Economic Journal, 2003, v113(491,Nov), F585-F631. citation courtesy of
Users who downloaded this paper also downloaded* these:
James Tobin, 1918-2002
Prominent Keynesian macroeconomist and monetary theorist at Yale.
Born and raised in Champaign, Illinois, James Tobin received his principal degrees from Harvard (B.A., 1939, M.A. 1940, Ph.D., 1946), where he came under the influence of Alvin Hansen, Seymour E. Harris and Joseph Schumpeter. While still an undergraduate, Tobin read the "new" book causing so much of a stir in England: John Maynard Keynes's General Theory, and was promptly hooked. Tobin's senior thesis emerged as a paper in the QJE, where he analyzed the conditions for the "Keynes Effect" of money wage flexibility, unearthing its implicit assumptions about factor substitutability.
Tobin interrupted his studies from 1942 to 1946, when he served with the U.S. Navy in the Pacific (the character, "Tobit", in Heman Wouk's novel, The Caine Mutiny, was based on him). Upon his return, he finished his Ph.D. In his 1947 paper, Tobin resurrected the money wage question. He focused on outlining the cases where the Keynes Effect might not work -- e.g. the "liquidity trap", zero interest-elasticity of investment, etc.
In 1950, James Tobin joined the faculty at Yale University, where he would remain until his retirement in 1988. Tobin was director of the Cowles Foundation from its move to Yale in 1955 until 1965 Tobin took leave in 1961 to serve on John F. Kennedy's Council of Economic Advisors (CEA) for two years.
1958 explaining the impact of diversification on portfolio selection.
Tobin's "Q ratio" (relation between a firm's physical capital and its market value)
"Tobin tax" (1978)
James Tobin won the Nobel Memorial prize in 1981 "for his analysis of financial markets and their relations to expenditure decisions, employment, production and prices".