Franco Modigliani
Encyclopedia
Franco Modigliani was an Italian economist
at the MIT Sloan School of Management
and MIT Department of Economics
, and winner of the Nobel Memorial Prize in Economics in 1985.
, Italy
, he left Italy in 1939 because of his Jewish origin and antifascist views. He first went to Paris with the family of his then-girlfriend, Serena, whom he married in 1939, and then to the United States. From 1942 to 1944, he taught at Columbia University
and Bard College
as an instructor in economics and statistics. In 1944, he obtained his D. Soc. Sci.
from the New School for Social Research working under Jacob Marschak
. In 1946, he became a naturalized citizen of the United States
, and in 1948, he joined the University of Illinois at Urbana-Champaign
faculty.
When he was a professor at the Graduate School of Industrial Administration of Carnegie Mellon University
in the 1950s and early 1960s, Modigliani made two path-breaking contributions to economic science:
In 1962, he joined the faculty at MIT, achieving distinction as an Institute Professor
, where he stayed until his death. In 1985 he received MIT's James R. Killian Faculty Achievement Award.
Modigliani also co-authored the textbooks, "Foundations of Financial Markets and Institutions" and "Capital Markets: Institutions and Instruments" with Frank J. Fabozzi
of Yale School of Management
.
In the 1990s he teamed up with Francis Vitagliano to work on a new credit card, and he also helped to oppose changes to a patent law that would be harmful to inventors.
Modigliani was a trustee of the Economists for Peace and Security
.
For many years, he lived in Belmont, Massachusetts
; he died in Cambridge, Massachusetts
.
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...
at the MIT Sloan School of Management
MIT Sloan School of Management
The MIT Sloan School of Management is the business school of the Massachusetts Institute of Technology, in Cambridge, Massachusetts....
and MIT Department of Economics
MIT Department of Economics
The MIT Department of Economics is a department of the Massachusetts Institute of Technology in Cambridge, Massachusetts.Undergraduate studies in economics were introduced in the 19th century by institute president Francis Amasa Walker. The department's Ph.D...
, and winner of the Nobel Memorial Prize in Economics in 1985.
Life and career
Born in RomeRome
Rome is the capital of Italy and the country's largest and most populated city and comune, with over 2.7 million residents in . The city is located in the central-western portion of the Italian Peninsula, on the Tiber River within the Lazio region of Italy.Rome's history spans two and a half...
, Italy
Italy
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...
, he left Italy in 1939 because of his Jewish origin and antifascist views. He first went to Paris with the family of his then-girlfriend, Serena, whom he married in 1939, and then to the United States. From 1942 to 1944, he taught at Columbia University
Columbia University
Columbia University in the City of New York is a private, Ivy League university in Manhattan, New York City. Columbia is the oldest institution of higher learning in the state of New York, the fifth oldest in the United States, and one of the country's nine Colonial Colleges founded before the...
and Bard College
Bard College
Bard College, founded in 1860 as "St. Stephen's College", is a small four-year liberal arts college located in Annandale-on-Hudson, New York.-Location:...
as an instructor in economics and statistics. In 1944, he obtained his D. Soc. Sci.
Doctor of Social Science
The Doctorate of Social Science is a higher qualification offered by select universities, which serves as a doctoral level qualification specifically relating to academic work in the field of social sciences....
from the New School for Social Research working under Jacob Marschak
Jacob Marschak
Jacob Marschak was an American economist of Ukrainian Jewish origin.- Life :...
. In 1946, he became a naturalized citizen of the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, and in 1948, he joined the University of Illinois at Urbana-Champaign
University of Illinois at Urbana-Champaign
The University of Illinois at Urbana–Champaign is a large public research-intensive university in the state of Illinois, United States. It is the flagship campus of the University of Illinois system...
faculty.
When he was a professor at the Graduate School of Industrial Administration of Carnegie Mellon University
Carnegie Mellon University
Carnegie Mellon University is a private research university in Pittsburgh, Pennsylvania, United States....
in the 1950s and early 1960s, Modigliani made two path-breaking contributions to economic science:
- Along with Merton MillerMerton MillerMerton Howard Miller was the co-author of the Modigliani-Miller theorem which proposed the irrelevance of debt-equity structure. He shared the Nobel Memorial Prize in Economic Sciences in 1990, along with Harry Markowitz and William Sharpe...
, he formulated the important Modigliani-Miller theoremModigliani-Miller theoremThe Modigliani–Miller theorem forms the basis for modern thinking on capital structure. The basic theorem states that, under a certain market price process , in the absence of taxes, bankruptcy costs, agency costs, and asymmetric information, and in an efficient market, the value of a firm is...
in corporate financeCorporate financeCorporate finance is the area of finance dealing with monetary decisions that business enterprises make and the tools and analysis used to make these decisions. The primary goal of corporate finance is to maximize shareholder value while managing the firm's financial risks...
. This theorem demonstrated that under certain assumptions, the value of a firm is not affected by whether it is financed by equity (selling shares) or debt (borrowing money).
- He was also the originator of the life-cycle hypothesis, which attempts to explain the level of saving in the economy. Modigliani proposed that consumers would aim for a stable level of consumption throughout their lifetime, for example by saving during their working years and spending during their retirementRetirementRetirement is the point where a person stops employment completely. A person may also semi-retire by reducing work hours.Many people choose to retire when they are eligible for private or public pension benefits, although some are forced to retire when physical conditions don't allow the person to...
.
In 1962, he joined the faculty at MIT, achieving distinction as an Institute Professor
Institute Professor
Institute Professor is the highest title that can be awarded to a faculty member at the Massachusetts Institute of Technology, a research university located in Cambridge, Massachusetts, United States...
, where he stayed until his death. In 1985 he received MIT's James R. Killian Faculty Achievement Award.
Modigliani also co-authored the textbooks, "Foundations of Financial Markets and Institutions" and "Capital Markets: Institutions and Instruments" with Frank J. Fabozzi
Frank J. Fabozzi
Frank J. Fabozzi is Professor of Finance at EDHEC Business School, one of Europe’s leading business schools, and a Member of . He was previously a Professor in the Practice of Finance and Becton Fellow in the Yale School of Management...
of Yale School of Management
Yale School of Management
The Yale School of Management is the graduate business school of Yale University and is located on Hillhouse Avenue in New Haven, Connecticut, United States. The School offers Master of Business Administration and Ph.D. degree programs. As of January 2011, 454 students were enrolled in its MBA...
.
In the 1990s he teamed up with Francis Vitagliano to work on a new credit card, and he also helped to oppose changes to a patent law that would be harmful to inventors.
Modigliani was a trustee of the Economists for Peace and Security
Economists for Peace and Security
Economists for Peace and Security is a United Nations-registered, New York-based NGO which links economists interested in peace and security issues. Inspired by International Physicians for the Prevention of Nuclear War, it was founded in 1989 as Economists Against the Arms Race , before becoming...
.
For many years, he lived in Belmont, Massachusetts
Belmont, Massachusetts
Belmont is a town in Middlesex County, Massachusetts, a suburb of Boston. The population was 24,729 at the 2010 census.- History :Belmont was founded on March 18, 1859 by former citizens of, and land from the bordering towns of Watertown, to the south; Waltham, to the west; and Arlington, then...
; he died in Cambridge, Massachusetts
Cambridge, Massachusetts
Cambridge is a city in Middlesex County, Massachusetts, United States, in the Greater Boston area. It was named in honor of the University of Cambridge in England, an important center of the Puritan theology embraced by the town's founders. Cambridge is home to two of the world's most prominent...
.
See also
- List of economists
- List of Jewish Nobel laureates
- Modigliani Risk-Adjusted PerformanceModigliani Risk-Adjusted PerformanceModigliani risk-adjusted performance or M2 or M2 or Modigliani–Modigliani measure or RAP is a measure of the risk-adjusted returns of some investment portfolio. It measures the returns of the portfolio, adjusted for the deviation of the portfolio , relative to that of some benchmark...
External links
- Franco Modigliani autobiography
- About Franco Modigliani from nobel-winners.com
- Memorial for Franco Modigliani - MIT Sloan
- his pioneering analyses of saving and of financial markets.
- School performance in the early years was good though not outstanding
- IDEAS/RePEc
- http://papers.ssrn.com/sol3/papers.cfm?abstract_id=976586Arno Tausch (2005) ‚World Bank Pension reforms and development patterns in the world system and in the “Wider Europe”. A 109 country investigation based on 33 indicators of economic growth, and human, social and ecological well-being, and a European regional case study’. A slightly re-worked version of a paper, originally presented to the Conference on “Reforming European pension systems. In memory of Professor Franco Modigliani. 24 and 25 September 2004”, Castle of Schengen, Luxembourg Institute for European and International Studies]