James Tobin, an American economist (1918-2002), and follower of Neo-Keynesian economics, thought that government intervention was necessary in order to stabilize the economy and to avoid recessions. He received the Nobel Prize in Economic Sciences in 1981 for his analysis of financial markets and their relation with decisions involving spending, employment, production and prices. In fact, Tobin discovered the relation between the market value, and the replacement value of an asset. This ratio is called Tobin´s Q, and it links the financial market to the markets of goods and services.
Tobin proposed the creation of a tax on international currency markets transactions -the so called “Tobin Tax”- in order to reduce speculation. He saw this tool as a means to promote freedom of trade; however it has also been encouraged by anti-globalization groups in order to reduce free trade.
Amongst other subjects, he also worked in the measuring of social welfare. Tobin believed GDP was not a good measure for accounting welfare, so he developed the concept of Measure of Economic Welfare as a more realistic measure. In his measurement, what does not create general satisfaction, such as armament, bureaucracy expenditure growth or new urban highways systems, must be left aside.