James Tobin, 84; Leading Economist

James Tobin, a leading American economist who was awarded the 1981 Nobel Prize in economics for his work on the portfolio selection theory, which analyzed changes in financial markets and their impact on the spending and investing habits of individuals and businesses, has died. He was 84.

Tobin, who once summed up his theory as, “Don’t put your eggs in one basket,” died Monday at a hospital in New Haven, Conn., of complications from a stroke.

The Sterling Professor Emeritus of Economics at Yale, Tobin also served on President John F. Kennedy’s Council of Economic Advisors.

But his greatest legacy may be his focus on how economic policies affected people’s lives. He believed that the government could use fiscal and monetary measures to benefit society.

He was described by fellow Nobel laureate Paul Samuelson as “the archetype of a late-20th century American scholar.”

Born in Champaign, Ill., Tobin was a child of the Depression. His mother was a social worker and his father a sports information director for the University of Illinois.

After winning an academic scholarship to Harvard in 1935, Tobin began studying economics. As an undergraduate student, he was introduced to the theories of the British economist John Maynard Keynes, whose then newly published book “The General Theory of Employment, Interest and Money,” advocating governmental intervention in the economy, would become a major influence on Tobin’s work.

He later explained how he became interested in economics.

“Economics has the virtue that it combines two things. One is that it’s an intellectually challenging subject to work in, particularly for people who have mathematical, quantitative aptitudes, talents and interests,” Tobin told a reporter. “Second, it has a lot of social relevance and real world importance. That combination was particularly appealing for someone like me in the late 1930s.”

Tobin earned bachelor’s and master’s degrees at Harvard, leaving in 1940 for government service, first in the Office of Price Administration in Washington, D.C., and then the Civilian Supply and War Production Board.

After the attack on Pearl Harbor, he enlisted in the Navy and met novelist Herman Wouk at the Navy officers training program at Columbia University. In his book “The Caine Mutiny,” Wouk immortalized his friend as the character Tobit, a midshipman with “a mind like a sponge ... ahead of the field by a spacious percentage.”

After serving four years on the destroyer Kearny in the Atlantic and Mediterranean, Tobin ended his naval duty as executive officer of the ship.

Tobin returned to Harvard after the war, earning his doctorate in 1947, and stayed on as a junior fellow.

He left in 1950 to join the Yale faculty as an associate professor of economics. He was promoted to full professor in 1955 and was named the Sterling Professor of Economics in 1957.

Tobin’s early work came to the attention of President-elect Kennedy. When selected for the Council of Economic Advisors, Tobin initially resisted, calling himself “an ivory tower economist.”

“That’s all right, professor,” Kennedy was said to have replied, “I am what you call an ivory tower president.”

A report Tobin wrote with two members of the council would be the subject of public debate for decades. Council members recommended goals of full employment, greater competition, stiffer enforcement of antitrust legislation and more investment in science and technology education and training.

After a year and a half in the Kennedy administration, Tobin returned to Yale.

In the 1960s, he espoused the “negative income tax” as a method to achieve income redistribution while maintaining incentives to work.

In 1972, he joined Sen. George S. McGovern’s campaign for the presidency as an advisor on economic reform.

That year, Tobin and Bill Nordhaus constructed a Measure of Economic Welfare for the American economy, which adjusted the conventional measurement of the gross national product. Tobin also introduced “Tobin’s q” as a way to predict whether capital investment would increase or decrease.

In the 1980s, Tobin was harshly critical of the supply-side theory of economics then in vogue, saying that it consisted of “half-baked proposals.”

In 1981, the Royal Swedish Academy of Science presented him with a Nobel Prize, citing his “creative and extensive work on the analysis of financial markets and their relations to expenditure decisions, employment, production and prices.”

The academy noted, “Unlike many other theorists in the field, Tobin does not confine his analysis solely to money, but considers the entire range of assets and debts.... Few economic researchers of today could be said to have gained so many followers or asserted such influence on contemporary research.”

Tobin, who retired in 1988, was the author of dozens of books and hundreds of articles.

He is survived by his wife, four children and three grandchildren.