Editing James Tobin (section)

===Legacy===
In August 2009 in a [[Round table (discussion)|roundtable]] interview in [[Prospect (magazine)|Prospect ''magazine'']], [[Adair Turner]] supported the idea of new global taxes on financial transactions, warning that the "swollen" financial sector paying excessive salaries had grown too big for society. Lord Turner's suggestion that a "[[Tobin tax]]" – named after James Tobin – should be considered for financial transactions made headlines around the world.

Tobin's [[Tobit model|Tobit model of regression]] with [[Censoring (statistics)|censored endogenous variables]] (Tobin 1958a) is a standard econometric technique.  His [[Tobin's q|"q" theory]] of investment (Tobin 1969), the [[Baumol–Tobin model]] of the transactions demand for money (Tobin 1956), and his model of liquidity preference as behavior toward risk (the asset demand for money) (Tobin 1958b) are all staples of economics textbooks.

In his 1958 article Tobin also led the way in showing how to deal with utility maximization under uncertainty with an infinite number of possible states. As Palda explains "One way to get out of the mess of figuring out asset prices using a model of maximizing the expected utility of investing in stocks is to make assumptions about either preferences or the probabilities of the different possible states of the world. Nobellist James Tobin (1958) took this line and discovered that in some cases you do not need to worry about the utility of income in thousands of states, and the attached probabilities, to solve the consumer's choice on how to spread income among states. When preferences contain only a linear and a squared term (a case of diminishing returns) or the probabilities of different stock returns follow a normal distribution (an equation that contains a linear and squared terms as parameters), a simple formulation of a person's investment choices becomes possible. Under Tobin's assumptions we can reformulate the person's decision problem as being one of trading off risk and expected return. Risk, or more precisely the variance of your investment portfolio creates spread in the returns you expect. People are willing to assume more risk only if compensated by a higher level of expected return. One can thus think of a tradeoff people are willing to make between risk and expected return. They invest in risky assets to the point at which their willingness to trade off risk and return is equal to the rate at which they able to trade them off. It is difficult to exaggerate how brilliant is the simplification of the investment problem that flows from these assumptions. Instead of worrying about the investor's optimization problem in potentially millions of possible states of the world, one need only worry about how the investor can trade off risk and return in the stock market."<ref>Palda, Filip (2013). ''The Apprentice Economist: Seven Steps to Mastery''. Ottawa: Cooper-Wolfling Press. {{ISBN|978-0987788047}}</ref>