- Person
- Franco Modigliani
- Lived
- 1918–2003
- Field
- Economics & finance
- From
- Italian-American
The story
Franco Modigliani discovered the pleasure of teaching early. After arriving in America as a refugee in 1939 and studying at night at the New School, he taught at the New Jersey College for Women and then at Bard College, where he came to value the close association with first-rate students that American campuses offered. He went on to the University of Illinois and the Carnegie Institute of Technology, where he did some of his most famous work.
In 1962 he joined MIT as a professor of economics and finance, after a visiting year there in 1960 and a year at Northwestern University. In 1970 he was named an Institute Professor, an appointment MIT reserves for scholars of distinction. He held posts in both the Department of Economics and the Sloan School of Management, teaching macroeconomics and finance side by side.
His colleague and friend Paul Samuelson described him as a great teacher, intense and colourful, and noted that Wall Street was full of experts who had studied with him. His students included Robert Merton, who won the Nobel Prize in 1997, and Lucas Papademos, with whom he later wrote an influential paper on unemployment and inflation. Richard Schmalensee, dean of the Sloan School, said Modigliani inspired generations of students and colleagues with his passion for using economics to benefit society. Philip Khoury, another MIT dean, remembered him always surrounded by young scholars eager to discuss the major economic and social issues of the day.
His energy extended beyond the classroom. Samuelson recalled that Modigliani was so intense on the tennis court that he once ran into a cement wall chasing a ball, and that their own collaboration began between serves. He served as president of the American Economic Association, the American Finance Association and the Econometric Society.
Modigliani became professor emeritus in 1988 but kept working and teaching until the last months of his life, dying in 2003 at the age of 85. In 1985 MIT gave him its James R. Killian Faculty Achievement Award, and in 1995 it established an endowed Modigliani Professorship of Financial Economics. Samuelson summed up his 40 years at the institute simply: he was a jewel in MIT's crown, active to the end.
Why it matters
Through his teaching, Modigliani passed on both rigorous economics and a sense of social purpose to generations of students who went on to shape finance and policy.
About Franco Modigliani
Rome-born economist who fled Mussolini’s racial laws and, at MIT, explained how people save over a lifetime and how firms are valued, winning the 1985 Nobel Prize.
More about Franco Modigliani
- Franco Modigliani bridged Keynes and classical economicsFranco Modigliani’s 1944 doctoral paper, “Liquidity Preference and the Theory of Interest and Money”, integrated Keynes’s revolution with classical economics.
- Franco Modigliani explained how people save over a lifetimeWith his student Richard Brumberg, Franco Modigliani developed the life-cycle hypothesis of saving in 1953–54, a key reason for his 1985 Nobel Prize.
- Franco Modigliani built a model used by the Federal ReserveIn the late 1960s Franco Modigliani led the design of a large model of the US economy for the Federal Reserve, a tool that guided monetary policy for decades.
- Franco Modigliani introduced the NIRU unemployment conceptIn 1975 Franco Modigliani and his former student Lucas Papademos introduced the NIRU, the non-inflationary rate of unemployment, a concept still debated in monetary policy.
- Franco Modigliani helped found rational expectationsAt Carnegie Tech, Franco Modigliani and Emile Grunberg published a paper on predicting social events when people react to predictions, a pillar of rational expectations theory.
- Franco Modigliani’s theorem reshaped corporate financeIn 1958 Franco Modigliani and Merton Miller showed that, under certain assumptions, a firm’s value does not depend on whether it is financed by debt or by shares.
Sources
- Nobel laureate Franco Modigliani dies at 85 MIT News
- Franco Modigliani Wikipedia
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