Early Life Academic activity and consultancy Contribution Tobin Tax Tobin’s q Personnel Life Achievements and Publications
Born on March 5, 1918 in Champaign, Illinois Father Louis Michael Tobin, a journalist working at the University of Illinois at Urbana-Champaign Mother, Margaret Edgerton Tobin, a social worker 1935-entrance exams for Harvard University 1939-graduated With summa cum laude 1947-Ph.D.at Harvard
Joined the Cowles Foundation, serving as its president between 1955–1961 and 1964-1965. Main research interest ◦ to provide micro foundations to Keynesian economics, with a special focus on monetary economics. In 1957 appointed Sterling Professor at Yale. Member of the Board of Governors of Federal Reserve System Academic Consultants Consultant of the US Treasury Department Awarded the John Bates Clark Medal in 1955 In 1981, the Nobel Memorial Prize in Economics A trustee of Economists for Peace and Security
Bretton Woods system suggested was an obligation for each country to adopt a monetary policy that maintained the exchange rate of its currency within a fixed value—plus or minus one percent —in terms of gold. “The United States dollar would no longer be convertible to gold”- United States President Richard Nixon, August 15, 1971 Created the situation whereby the U.S. dollar became the sole backing of currencies and a reserve currency for the member states of the Bretton Woods system, leading the system to collapse in the face of increasing financial strain in that same year
This dissuades speculators as many investors invest their money in foreign exchange on a very short-term basis. If this money is suddenly withdrawn, countries have to drastically increase interest rates for their currency to still be attractive. Tobin Tax :A tax on all spot conversions of one currency into another At each exchange of a currency into another a small tax would be levied - lets say, 0.5% of the volume of the transaction.
The ratio between the market value and replacement value of the same physical asset If the market value reflected solely the recorded assets of a company, Tobins q would be 1.0. If Tobins q is greater than 1.0, then the market value is greater than the value of the companys recorded assets. This suggests that the market value reflects some unmeasured or unrecorded assets of the company. High Tobins q values encourage companies to invest more in capital because they are "worth" more than the price they paid for them.
q = Market Value Of Installed capital Replacement Cost of capital If a companys stock price is $2 and the price of the capital in the current market is $1; the company can issue shares and with the revenue invest in capital. In this case q>1. On the other hand, if Tobins q is less than 1, the market value is less than the recorded value of the assets of the company. This suggests that the market may be undervaluing the company.
James Tobin married Elizabeth Fay Ringo, a former M.I.T. student of Paul Samuelson, on September 14, 1946 Betty was a recent student of Samuelsons at M.I.T., teaching economics at Wellesley College at the time we met They had four children: Margaret Ringo (born in 1948), Louis Michael (born in 1951), Hugh Ringo (born in 1953) and Roger Gill (born in 1956) Died in March 11, 2002(2002-03-11) (aged 84) New Haven, Connecticut, USA
John Bates Clark Medal (1955) Nobel Prize in Economics (1981) “The Sveriges Riksbank” Prize in Economic Sciences in Memory of Alfred Nobel 1981 1961-62, served as a member of John F. Kennedys Council of Economic Advisors, Enrolled in the US Navy, spending the war as an officer on a destroyer. Tobin, James (1941). "A note on the money wage problem". Tobin, James (1956). "The Interest-Elasticity of Transactions Demand for Cash,“ Tobin, James (1969). "A General Equilibrium Approach to Monetary Theory". Tobin, James (1958). "Liquidity Preference as Behavior Towards Risk".
Economists for Peace and Security History: James Tobin http://www.nobelprize.org/ http://cowles.econ.yale.edu http://www.epsusa.org