The passing of an economics legend

When 84-year-old professor emeritus James Tobin died of a stroke over Spring Break, Yale lost more than one of its greatest economists. It lost a man who committed his life to using his vast talents to better the world around him.

Tobin grew up during the Great Depression and cited the economic malaise he witnessed during his childhood as a major reason behind his decision to join the economics profession. Fittingly, his ability to craft models that applied to the real world proved valuable in a profession too often criticized for imposing simplistic theories on complex problems. For him, economics was not simply a science, but a social science, and Tobin developed a knack for combining brilliant theory with actual policy.

Tobin might be remembered best for his groundbreaking “Portfolio Selection Theory,” which won him the Nobel Prize in 1981. His research proved that investors diversify their portfolios to manage risk. The fact that investment firms, major corporations and private investors now take the importance of diversification for granted is evidence of the effect Tobin’s theory has made.

Furthermore, many will remember Tobin’s willingness to temporarily leave his research post to serve on President John F. Kennedy’s Council of Economic Advisers. Working with a council that New York Times columnist Paul Krugman called “the best collection of academic talent to serve the U.S. government since Alexander Hamilton pondered alone,” Tobin helped devise a tax cut that many credit as vital in jump-starting the nation’s economy in the early 1960s.

Despite his prominence in national politics and academia, Tobin never relented from his commitment to the University, where he spent a remarkable 50 years of his life.

In 1955, Tobin brought the Cowles Foundation, an economic research center, from the University of Chicago to Yale. In the 47 years since then, the Cowles Foundation has come to be recognized as one of the greatest university centers for economic research in the country, benefiting not only from Tobin’s prestige but from the years of hard work he poured into it.

Tobin also proposed a rule that the University only spend a fixed portion of its endowment each year. Yale continues to employ the rule today, and it has been a guiding principle in maintaining the nation’s strongest college endowments.

Those who knew Tobin well cannot overstate the impact he had on their lives and careers. Through contact as a professor and colleague, he passed on his rare combination of academic and public leadership to people like Yale President Richard Levin GRD ’74, former Treasury Secretary and Harvard President Lawrence Summers, and Janet Yellen GRD ’71 — President Bill Clinton’s top economist and a member of the Yale Corporation.

Throughout his career, Tobin not only improve the lives of people around the world with his economic brilliance, but he helped play a defining role in making Yale the place it is today. For that, all of Yale will sorely miss him.

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