James Tobin 101: Explore the Economist Behind Tobit Model
Zatrun Published at April 14, 2023

James Tobin 101: Who is the Famous American Economist? In this article on, we will cover in detail everything you need to know about James Tobin, the famous American economist that our readers are curious about.

Who is James Tobin?

James Tobin was an American economist born on March 5, 1918 in Champaign. His father was a journalist who worked at the University of Illinois, and his mother was a social worker. Tobin completed his primary education at Urbana University Laboratory High School, located on a university campus. On the advice of his father, he took the Harvard University entrance exam in 1935.

Although he had no special preparation for the exam, he succeeded and was accepted by the university with a national scholarship. Here he would meet many names such as Joseph Schumpeter, Alvin Hansen, Gottfried Haber, Sumner Slichter, Seymour Harris, Edward Mason, EdFward Chamberlin, John Kenneth Galbraith and Wassily Leontief. During his studies, he studied Keynes’s “General Employment Theory”.

in 1939, James Tobin graduated as a top student by submitting his dissertation on the mechanism of achieving equilibrium in cases of “involuntary” unemployment, a critical examination of Keynes’s work. This thesis analysed the existence of equilibrium in a case of non-voluntary unemployment. His first article, published in 1941, was also about this thesis. James Tobin began his doctoral studies as soon as he received his master’s degree in 1940.

In 1941, he took a break from his doctoral studies to work in Price Control Management and the Civilian Deconfliction Office and the War Production Board in Washington, DC. The following year, the United States began World War II. When he entered World War II, he was drafted into the U.S. Navy and served as an officer on a destroyer throughout the war. After the war, he returned to Harvard to continue his doctoral studies and received his doctoral degree with a dissertation on expenditure functions under the supervision of Joseph Schumpeter.

His Career Life

James Tobin began his tenure at Yale University, where he would spend the rest of his career in 1950. Upon arrival at Yale, he joined the Cowles Foundation, an economic research institute, and served as the institution’s director from 1951 to 1961 and again from 1964 to 1965. James Tobin’s research is based on a monetary approach aimed at developing and supporting the Keynesian economy. He was appointed professor of economics at Yale in 1957.

In addition to his teaching and researches, Tobin was deeply interested in public life. He authored articles on current economic issues and served as an economic expert and policy advisor. From 1961 to 1962, John F, led by Walter Heller. He served on Kennedy’s Council of Economic Advisers. He collaborated with Arthur Okun, Robert Solow, and Kenneth Arrow in designing the Kennedy administration’s economic policies.

Tobin has also served on the Board of Academic Advisors of the Federal Reserve System and as an advisor to the Treasury Department. Tobin officially retired from Yale in 1988 but continued to teach and write as a Professor Emeritus. He died on March 11, 2002 in Connecticut.

Academic Contributions and Nobel Prize

Throughout his life, James Tobin has served on the White House Council of Economic Advisers, the Board of Governors of the Federal Reserve System, and taught at Harvard and Yale Universities. Tobin was instrumental in developing Keynesian economic thought and advocated government intervention against economic downturns.

His academic work consisted of pioneering articles in the fields of investments, monetarism, financial policies, and capital markets. Tobin also produced the econometric model known as the “Tobit Model”, which explains the existence of hidden (unobservable) internal variables. In 1981, Tobin was awarded the Nobel Prize in Economics.

At the same time, Tobin proposed the “Tobin Tax”, a foreign exchange transaction tax. He saw this tax to reduce speculation in the international currency markets, which he found dangerous and inefficient. The Tobin Tax has become well known and is still being discussed today as a possible solution to prevent financial market instability.

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