James Tobin, Economist and Nobel Laureate, Dies
James Tobin, 84, a Yale University economics professor who won the 1981 Nobel Prize in economics for his analysis of investments and financial markets known as portfolio selection theory, died March 11 at a hospital in New Haven, Conn., after a stroke.</br></br>Dr. Tobin, who was said to have been among the most influential and creative economists of his time, served on the Council of Economic Advisers in John F. Kennedy's administration. He was a major contributor to theories of investment, consumption, money and banking and economic growth, and he was widely known in academia and business as a leading apostle of the economic thinking of British economist John Maynard Keynes: that tax and budget policies can be used effectively to regulate an economy.</br></br>As a Keynesian economist, Dr. Tobin feuded with monetarists who argue that controlling the supply of money and credit is the best way to regulate an economy. His sharp attacks on Milton Friedman, the winner of the 1976 Nobel Prize in economics and widely recognized as the dean of monetarists, were particularly well publicized, as were his criticisms in the early 1980s of Federal Reserve Board Chairman Paul A. Volcker. Volcker's "single-minded" effort to curb inflation with tough monetary policy, Dr. Tobin told a congressional subcommittee, was likely to result in damage "to the real economy in terms of unemployment, low production, recession, low investment and so on."</br></br>Economics, Dr. Tobin once told a meeting of the American Economic Association, "inevitably blends ideology and science."</br></br>Describing the portfolio selection theory that helped him win a Nobel Prize, he said it "sets forth the principle of not putting all your eggs in one basket because then, if something goes wrong, you lose them all at once." This theory was said to have been influential in the willingness of investors to diversify holdings. Hobart Rowen, the late Washington Post business editor, wrote that "Tobin's work for the first time showed the relationship of financial assets to the development of government financial policy."