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Independence day dedicated to the US Economist James TOBIN

Independence day dedicated to the US Economist James TOBIN

James Tobin Professor of Yale University and Nobel Prize in Economics in 1981. American economist of the twentieth century, notable for the roles he held, James Tobin was advisor to President J.F Kennedy  ... ...


American economist of the twentieth century, notable for the roles he held, James Tobin was advisor to President J.F Kennedy  and also a tenacious opponent of that part of economists who supported "monetarists" theories as were in fact John Maynard Keynes whose economic theories found wide acceptance in the economic policies of R.W. Regan and then replicated by George Bush in 2000.

TOBIN was an economist of great moral value, not only technical-scientific, for the work carried out in research on issues related to wages and employment, issues that today are still very current and important in order to guarantee economic sustainability. social status of many countries of the European Union, not least Italy.

The economist James TOBIN has given a subtle interpretation to what he considered to be a great threat to the economies of countries, inflation.


Tobin's main works


In the work "Elasticity at the interest rate of the demand for money for transactions" of 1956 we want to recall the dangers that James TOBIN commented on inflation and price growth as the main threat of poverty, without forgetting his great doubts about goodness. 'of the theories of monetarists, who instead, unlike TOBIN, argued that to create growth it was necessary to maintain a high level of unemployment as masses with low incomes allow greater control over price stability.

Tobin reformulates the demand for money on the basis of the theory of stocks and scientifically demonstrates that the demand for money is strictly dependent on the interest rate without resorting to "speculation" as proposed and explained by J.M. Keynes.

James TOBIN considered these monetarist policies as condemning humanity to have to live even long periods of unemployment. It must be recognized that this aversion to monetarist theories (among other things applied by Central Banks in the last twenty years) was due to the moral importance that he attributed to the fight against poverty, the guarantee of work and the protection for the most disadvantaged.

In "Liquidity Preference as Risk Behavior" (1958), James TOBIN introduced the important concept of risk aversion by explaining portfolio choices between different assets. On this basis, TOBIN has built a theory of portfolio choices and a general equilibrium analysis applied to monetary theory.


Tobin's q:

His great contribution is the thesis put forward by him according to which companies whose share capital is traded on a regulated market base their investment decisions through the "q" ratio which results by dividing the market value of the economic capital valued by market and its replacement value, or the price that would have to be paid today to repay all the economic capital of the firm.

Using this formula, Tobin explained that the amount of net investments depended on whether "q" is greater or less than 1. If "q"> 1 it means that the firm's value on the stock market is greater than the redemption value of the capital and therefore the firm has liquidity surplus' in fact it becomes simple in these cases for the firm's managers to acquire new capital resources to increase the value of the share. Conversely, when "q" <1 it means that the market values ​​the firm's capital less than its repayment cost.




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