James Tobin was a Neo-Keynesian economist who received the 1981 Nobel Prize in economics for his research on the financial system and its impact on inflation and employment.
He is known for spearheading the Tobin Tax, a levy on foreign exchange transactions to reduce currency speculation.
Tobin is the writer of several books remembering Essays for Economics and Money, Credit and Capital. James Tobin kicked the bucket on March 11, 2002.
Early Life and Education
James Tobin was brought into the world on March 5, 1918, in Champaign, Ilinois. He earned both a single guy's and graduate degree from Harvard University.
After his graduation in 1940, Tobin started his career at the Office of Price Administration and Civilian Supply in Washington, D.C. During World War II, he served in the United States Navy.
Tobin returned to Harvard to earn a Ph.D. in economics in 1947 and joined the workforce at Yale University in 1950 until his retirement in 1988.
Applying the study of economics to certifiable issues directed James Tobin's work all through his career and he once noted, "Economics has forever been a policy-situated subject. Except if it is applied to the dire policy issues of the day, it will end up being a sterile exercise, without use or interest."
In 1961, President Kennedy welcomed James Tobin to act as one of three economists on his Council of Economic Advisers. The group helped the executive branch on economic policy issues and distributed the 1962 Economic Report, a statement of stabilization and growth policies known as the "new economics".
Notwithstanding his work with the Kennedy Administration, Tobin filled in as a scholarly consultant to the Board of Governors of the Federal Reserve and the U.S. Treasury Department.
Portfolio Selection Theory
James Tobin received the Nobel Prize in economics in 1981 for his analysis of financial markets and their relations to expenditure choices, employment, production, and prices.
His portfolio selection theory characterizes how financial markets influence the investment choices of families and businesses in view of weighted risks and expected rates of return. Tobin underscored that these microeconomic choices made inside a home or business influence macroeconomic aggregates, for example, overall [consumption](/purchaser spending), employment, and inflation.
The Tobin Tax
James Tobin developed the "Tobin Tax" in response to the collapse of the Bretton Woods agreement in 1971. Unpredictable floating currency exchange rates supplanted fixed currency exchange rates once founded on the U.S. dollar's connect to a gold standard.
As money moved rapidly in an environment of shifting rates, Tobin proposed to reduce this volatility with a small tax imposed on each transaction of exchange starting with one currency then onto the next. This tax would deter short-term currency speculation and cushion the effect of such speculation on small developing economies, which couldn't contend with large financial institutions.
The "Tobin Tax" was not officially executed or utilized until after James Tobin's death in 2002 and Tobin's original purpose of stopping currency speculation has been obscured by thoughts of involving the tax to globally raise revenue for economic and social development.
The Bottom Line
James Tobin was an American economist who received the 1981 Nobel Prize in economics. He spearheaded the "Tobin Tax," the study of portfolio selection theory, and has influenced speculations in economics including the Baumol-Tobin Model and the "Tobin Q."
- He developed portfolio selection theory and the "Tobin Tax."
- Tobin received the Nobel Prize in economics in 1981.
- James Tobin was a member of President Kennedy's Council of Economic Advisers.
What Is the Tobin Project?
Established in 2005, the Tobin Project is an independent, non-benefit research organization in light of crafted by James Tobin and spearheading research on squeezing issues of the 21st century zeroing in on institutions of a majority rules system, government and markets, economic inequality, and public safety.
What Is Tobin's Q Ratio?
The Tobin's Q ratio was developed in 1966 by Nicholas Kaldor, an economist, and promoted by James Tobin while he was a teacher at Yale University. Tobin's Q ratio characterizes the value of a company as its total asset value separated by its market value.
What Is the Baumol-Tobin Model?
The theory developed by William Baumol and James Tobin studies the tradeoff between the value of the liquidity given by holding cash versus the value of the interest lost by keeping money liquid.