The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1981
I studied economics and made it my career for two reasons.
The subject was and is intellectually fascinating and
challenging, particularly to someone with taste and talent for
theoretical reasoning and quantitative analysis. At the same time
it offered the hope, as it still does, that improved
understanding could better the lot of mankind. For me, growing up
in the 1930s, the two motivations powerfully reinforced each
other. The miserable failures of capitalist economies in the
Great Depression were root causes of worldwide social and
political disasters. The depression also spelled crisis for an
economic orthodoxy unable either to explain events or prescribe
remedies. The crisis triggered a fertile period of scientific
ferment and revolution in economic theory. The excitement reached
beginning undergraduate students like myself. In 1936, at the
start of my sophomore year, a young tutor at Harvard College,
Spencer Pollard, suggested we read together a new book by an
English economist, J.M. Keynes, and I was hooked.
My mother and father had paved the way. Margaret Edgerton Tobin, now in her ninetieth year, was a social worker who, after a sixteen-year interruption for marriage and family, resumed her career in the relief emergency of 1932 and directed the family service agency of Champaign-Urbana, Illinois, for the next quarter century. From her first-hand accounts I learned of the human suffering of unemployment and poverty. Louis Michael Tobin (1879-1943), a journalist, was, from my early childhood, the publicity director for University of Illinois athletics. The fortunes of Illinois sports teams were a big thing in our lives, to be sure. My father also happened to be an intellectual, as learned, literate, informed, and curious as anyone I have known. Unobtrusively and casually, he was my wise and gentle teacher. In the home territory of the arch-conservative Chicago Tribune, our home was sprinkled with alien periodicals like the Nation, New Republic, and Mencken's American Mercury. In our town, and among my mother's relatives in Wisconsin, my parents, and, in time, I and my young brother too, were known for eccentric but well-argued political views. I cast the only straw vote for Roosevelt in 1932 in a poll of a sophomore high school class mostly composed of university faculty children.
I was born in Champaign in 1918. From the neighborhood elementary and intermediate schools, I went to the University High School in the twin city, Urbana. The school was operated by the university's College of Education primarily to give its students practical training in teaching. The master teachers who guided the trainees also gave us a marvelous education. The graduates number only 30 to 40 annually, but they win many scholarships in national competition. Two alumni, Philip Anderson and Hamilton Smith, are Nobel laureates. Ironically, my award this year was announced, coincidentally, with news that the school might be closed for lack of funding.
For me, one good thing about Uni-High was that in a small school, I could earn a place on the varsity basketball team, fulfilling athletic ambitions that had seemed beyond reach in my childhood. Another was that it prepared me exceptionally well for Harvard, even though neither the school nor I ever thought that midwestern teen-agers might go to a prestigious expensive eastern college a thousand miles away. I happily took for granted that I would attend the very good local university and probably go on to its law school. Harvard was my father's idea. By chance, President James B. Conant of Harvard was just then inaugurating national full-cost scholarships designed to diversify the geographical, scholastic, and social sources of the student body, and he was starting with the midwestern states. All this my father learned because he habitually read the New York Times in the public library. So, I wrote in June three days of entrance exams for which I had neither received nor made any special preparation. I learned the amazing good news in August, and in September 1935, on the train to Boston, I left the midwest for the first time.
Four years later I received my Harvard baccalaureate. My proud parents attended the commencement, their first trip east since their honeymoon in New York in 1916. After the outbreak of war in 1939 washed out the Wanderjahr for which I had been granted a travelling fellowship, I spent the next two years as a graduate student at Harvard. Those six years were a great experience. My fellow students, many of them my lifelong friends, were of diverse backgrounds, interests, and talents. My teachers ranged from Alfred North Whitehead, about to retire, to eager young instructors. I joined the intense political debate and activity that absorbed the campus in those critical pre-war years. In economics, Harvard, the center of the intellectual ferment of the day, was enjoying a golden age. Joseph Schumpeter, Alvin Hansen1, Seymour Harris2, Edward Chamberlin, Edward Mason, Gottfried Haberler, Sumner Slichter, and Wassily Leontief were the professors who meant most to me. In addition, there was a superb assemblage of young faculty and graduate students, Paul Samuelson, Lloyd Metzler, Paul Sweezy, J.K. Galbraith, Abram Bergson, Richard Musgrave, Richard Goodwin, Richard Gilbert, Lloyd Reynolds, John P. Miller and others who would be leaders of the profession in later years.
I left Harvard in the spring of 1941. Ed Mason, for whose seminar I had written a paper on the uses of statistical forecasting in economic mobilization, steered me to a job in Washington in a new agency charged with restricting civilian uses, e.g., in autos and other consumer durables, of metals and other materials needed for growing defense production. Aside from Melvin De Chazeau and Arthur R. Burns, we economists were all youngsters, suddenly charged with the practical responsibilities of setting quotas and explaining them to the victims.
After the United States entered the war, I joined the Naval Reserve and spent ninety days in a Columbia University dormitory learning to be a naval officer. Among my friends were, for alphabetical reasons, Cyrus Vance and Herman Wouk. Wouk's thinly disguised reference to me in The Caine Mutiny was until recently my main source of notoriety. I spent nearly four years as a line officer on the destroyer U.S.S. Kearny, serving eventually as gunnery officer and then navigator and executive officer (second in command). Mostly, our ship engaged in convoy escort and other anti-submarine duty in the Atlantic and Mediterranean, but we also participated in the invasions of North Africa and Southern France and in the Italian campaign. I liked and valued the experience, just because its demands and tests were so different from academics. But I rejoiced with my shipmates when, after escorting occupation troop ships to Japan, we left the ship in Charleston Navy Yard to be put in "mothballs."
I was tempted by opportunities to return to Washington. But a timely letter from the Harvard Economics Chairman, Harold H. Burbank, persuaded me my future was in academia, and I returned to complete my Ph.D. in 1946-47. I am forever grateful to Professor Burbank, mainly for a reason that will become clear later in this story. I wrote a doctoral dissertation on the theory and statistics of the consumption function, a lasting interest of mine. In 1947 I was elected Junior Fellow of the Society of Fellows, an appointment that allowed me three years of freedom for study, research, and writing. Like my high school, the Society can claim a number of Nobels, four this very year. Harvard's golden age in economics extended to these postwar years, when several cohorts of able and mature graduate students and junior faculty converged. I used my Junior Fellowships to catch up with the economics, especially the econometrics I had missed during the war, to collaborate on a sociological-economic book, The American Business Creed, and to write a number of articles in macro-economics, statistical demand analysis, and the theory of rationing. Some of this took place in 1949-50 in England at Richard Stone's Department of Applied Economics in Cambridge where I benefited especially from fruitful collaboration with Hendrik Houthakker and lively discussions with him and the late Michael Farrell.
I have been at Yale since 1950. It has been a marvelous place for research, teaching, and living. The Economics Department has grown in size and stature, helped mightily by the coming of the Cowles Foundation (previously Commission) in 1955, with its remarkable leaders, Tjalling Koopmans and Jacob Marschak. Under their direction at Chicago, the Cowles Commission was one of the most productive research centers in history, inaugurating modern econometrics and activity analysis. Its alumni include Kenneth Arrow, Herbert Simon, and Lawrence Klein. I was director of the Foundation at Yale from 1955 to 1961 and from 1964 to 1965.
At the time, my personal research objectives were to provide Keynesian economics with more rigorous foundations and to tighten and elaborate the logic of macroeconomic and monetary theory. My Nobel lecture is, in a sense, a summary account. Largely because of my interests, the foundation added monetary theory and macroeconomics to its previous lines of inquiry. The logistical support, research assistance, and collegial setting of the Cowles Foundation have been invaluable. Most important, I have learned from my colleagues and students. The two persons to whom I owe the most are the late Arthur Okun3 and William Brainard. I taught with them and collaborated with them; I argued with them, and they were usually right. Others with whom I have worked closely and fruitfully on topics related to my lecture include David Backus, Martin Neil Baily, Willem Buiter, John Ciccolo, Walter Dolde, Harold Guthrie, Challis Hall, Koichi Hamada, Donald Hester, Susan Lepper, Jorge de Macedo, Harry Markowitz, Donald Nichols, William Nordhaus, Edmund S. Phelps, James Pierce, Richard C. Porter, Richard Rosett, Gary Smith, Craig Swan, Harold Watts, and Leroy Wehrle. Moreover, the presence on the faculty of Ray Fair, William Fellner, Raymond Goldsmith, Richard Ruggles, Robert Triffin, and Henry Wallich made Yale a stimulating environment for work in macroeconomics, money, and finance. Outside Yale, Paul Samuelson4, Robert Solow, and Franco Modigliani at M.I.T. have, to my vast benefit, shared many of my interests and viewpoints. Likewise, I learned much over the years by maintaining friendships and contact with George Katona, James Morgan and others at the University of Michigan Survey Research Center, and with the late Harry Johnson5. Other intellectual debts, including those to giants of the field whose influence on me came only through their writings, are indicated in my lecture.
Yale places great stress on undergraduate and graduate teaching. I like teaching, and I do a lot of it. I never fail to learn, from the students themselves and from the discipline of presenting ideas clearly to them. A large and durable reward is the legion of friends of all ages.
Beginning in the late 1950s I have written occasional articles on current economic issues directed to lay readers, not just to professional economists. A collection of these, National Economic Policy, was published in 1966. I have frequently testified before committees of the Congress, and I have advised government agencies and political candidates. From 1966 to 1970 I served as Chairman of the New Haven City Plan Commission.
My principal excursion into public life was as a Member of President Kennedy's Council of Economic Advisers in 1961-62, together with Walter Heller, Chairman, and the late Kermit Gordon6. After I returned to Yale, I was an active consultant to the Council for several years. The Kennedy Council recruited a remarkable staff, including Okun, Solow, and Arrow. Our collective magnum opus is the 1962 Economic Report, a full statement of the theory and practice of the policies for stabilization and growth associated with what the press then called the "new economics". Work at the Council was demanding, exciting, and sometimes frustrating. But our advice gradually gained a large measure of acceptance, and by the end of 1965, our basic macroeconomic goals were achieved. Alas, these victories were lost during the Vietnam war and the stagflation of the 1970s.
The greatest good fortune of my return to Cambridge in 1946 was that there, in the spring, I met Elizabeth Fay Ringo. We were married a few months later. By coincidence, Betty was a recent student of Samuelson's at M.I.T., teaching economics at Wellesley College at the time we met. By greater coincidence, she had grown up in northern Wisconsin not far from the family retreat where I spent nearly every summer of my life. We go there still. I diverted Betty, she sometimes says rescued her, from economics. But her clarity about sense and nonsense, right and wrong, fair and unfair, poor and rich has kept my priorities straight, in my professional work as in my personal life. In our first thirty-five years I have learned many other things too, in sharing her enthusiasms for animals, especially Newfoundland dogs, baseball, fireplaces, birds, nature, fishing, dancing, and jazz. We are ardent, if mediocre, skiers, alpine and crosscountry, and tennis players. In Wisconsin we like to canoe down rivers and swim and sail on our small lake. In the 1960s, Betty returned to teaching for eight years, this time in inner-city public primary schools, infinitely more demanding and challenging than college classrooms.
Together, we raised four remarkable children, a daughter, the eldest, and three sons, and we shared the fascination, joy, and occasional anxiety of watching babies become, all too quickly, adults. Differing in personalities, interests, and talents, they all have taught us no less than we taught. Our daughter is a costume and fashion designer and a writer; two sons, both married, are lawyers; the youngest is a graduate student of physics. Our first grandchild, a girl, was born in 1981. We still live in the house we bought the first year we lived in New Haven. Our whole family regularly joins us there or in Wisconsin or at our ski chalet in Vermont.
1. J. Tobin,
"Hansen and Public Policy," Quarterly Journal of
Economics, Vol. XC, Feb. 1976, pp. 32-37.
2. J. Tobin, Tribute at the Memorial Service for Seymour Harris, Harvard University, Dec. 12, 1974, privately printed in Berkeley, California, 1976.
3. In Memoriam, Arthur M. Okun, A Tribute by James Tobin, Washington, D.C., The Brookings Institution, 1980, pp. 1-5.
4. James Tobin, "Macroeconomics and Fiscal Policy," forthcoming as a chapter in Paul A. Samuelson and Modern Economics, McGraw-Hill.
5. James Tobin, "Harry Gordon Johnson 1923-1977," Proceedings of The British Academy, London, 1978, Vol. LXIV, pp. 443-458.
6. J. Tobin, Kermit Gordon (1916-1976), Year Book, The American Philosophical Society, 1978.
From Les Prix Nobel. The Nobel Prizes 1981, Editor Wilhelm Odelberg, [Nobel Foundation], Stockholm, 1982
This autobiography/biography was written at the time of the award and later published in the book series Les Prix Nobel/Nobel Lectures. The information is sometimes updated with an addendum submitted by the Laureate.
James Tobin died on March 11, 2002.
Copyright © The Nobel Foundation 1981