On James Tobin

James Tobin 
Embarrassed proponent of an international tax 
Godfrey Hodgson
Guardian 
Wednesday March 13, 2002 
The American economist James Tobin, who has died aged 84, was a 1981 Nobel
prizewinner and former Kennedy adviser best known for an idea taken up in
ways that he had mixed feelings about. Today is Tobin Tax Day, a world event
organised by opponents of globalisation to publicise his proposal for a tax
on foreign exchange speculation. 
Tobin was embarrassed by the way he found himself a hero to the
international left some 20 years after suggesting the tax. He once said that
the adversaries of globalisation had "hijacked his name". He insisted that
he was a supporter of free trade, and in favour of the International
Monetary Fund, the World Bank and the World Trade Organisation. 
Even so, he remained to the end a classic liberal. As a second-year Harvard
student, he was "hooked" by the economic ideas of John Maynard Keynes, and
inspired by the ideals of the New Deal. Later, he became a member - with
Walter Heller and Kermit Gordon - of President Kennedy's council of economic
advisers, and took pride in his joint authorship of its 1962 report, a
statement of the "new economics". He regretted that the potential of those
policies was sacrificed during the Vietnam war and the stagflation of the
1970s. 
His friend Paul Samuelson called Tobin "an unregenerate Democrat", and, in
1972, he was an adviser to the unsuccessful Democratic presidential
candidate, George McGovern. In 1981, he sharply criticised Reaganomics,
saying - presciently - that the Reagan administration's policies would widen
the gap between rich and poor. Reagan's tax cuts, he predicted, would
"redistribute wealth, power and opportunity to the wealthy and powerful, and
their heirs". 
Tobin always held that the science of economics was about improving the
happiness of mankind, an idea born of his youth in the depression. His was
not, however, a narrow ideological position. He professed an admiration for
Alan Greenspan, the conservative chairman of the federal reserve: "Greenspan
was lucky," he told the German magazine Der Spiegel, last year, "but he was
also brave." But Tobin also wrote in 1997 that "the unprecedented inequality
of wealth, income and wages in America is a crisis threatening the sense of
community, the essential foundation of the republic." 
Tobin grew up in the mid-western college-town atmosphere of
Champaign-Urbana, home of the University of Illinois. His father, a former
journalist, was publicity director for athletics, meaning especially
American football, at the university, but also - Tobin later recalled - "an
intellectual, learned, literate, informed and curious". His mother was a
social worker who told him about the human suffering caused by unemployment.

He went to the school run by the university's education department for
teachers to practice in, and won one of the first scholarships to Harvard.
There, he was taught by Alfred North Whitehead, Alvin Hansen (the first
great sponsor of Keynes' ideas in America) and Wassily Leontieff, among
others. It was something of a golden age for Harvard economics, Tobin later
recalled: John Kenneth Galbraith and Paul Samuelson were among the graduate
students. 
Tobin saw wartime naval service in the Atlantic and the Mediterranean. One
of his fellow officers was Herman Wouk, who introduced him, in thin
disguise, into his bestselling novel The Caine Mutiny. After the war, he
returned to Harvard to complete his doctoral thesis on the consumption
function. Following a year at Cambridge University, in 1950 he went to Yale,
became professor in 1955 - and stayed until 1988. 
Over the years, Tobin devoted more of his time and energy than many American
economists to teaching. In his early years at Yale, his research interests
centred on strengthening the theoretical foundations of Keynesian economics.
After it moved to Yale, he served for several years as director of the
Cowles Foundation, which played a crucial part in spreading modern
econometrics and mathematical economics. 
He won the Nobel prize for his work on "financial markets and their
relations to decisions, employment, production and prices", and especially
for his study of "portfolio selection" - how families distribute their
wealth between different investments, such as property, bonds and shares. He
himself called it a theoretical framework for "not putting all your eggs in
one basket". 
The Tobin tax was an idea he came up with in 1972, at a time when the
Bretton Woods system was in turmoil and currency speculation was rife - with
computers making it easier. Tobin suggested a tax of 0.1-0.5% on foreign
exchange transactions to limit speculation. After his idea was picked up by
anti-globalisation campaigners, he seemed embarrassed. He told Der Spiegel,
"I have absolutely nothing in common with those anti-globalistion rebels . .
. the loudest applause is coming from the wrong side." 
In the same year that he suggested the controversial tax, Tobin (with Bill
Nordhaus) proposed changes to the measurement of the US gross national
product, and a formula to predict the movement of capital investments. 
Until his death, he lived in the house he bought when he arrived at Yale.
With his wife, Betty, an economics professor at Wellesley College, whom he
"diverted" (his word) or "rescued" (hers) from economics, he also bought a
house on a lake in northern Wisconsin, where she had grown up, and where
they liked to sail and canoe. She survives him, as do their daughter and
three sons. 
· James Tobin, economist, born March 5 1918; died March 11 2002