When James Tobin joined President John F. Kennedy’s administration in 1961, the U.S. economy was struggling to recover from its third recession in seven years. As a member of Kennedy’s Council of Economic Advisers, the Yale University professor put his theoretical research on asset markets to work in fashioning a novel strategy -- nicknamed Operation Twist -- to reduce long-term interest rates.
Now, more than half a century later, two of Tobin’s Ph.D. students -- Janet Yellen, nominated to be the next chairman of the Federal Reserve, and Koichi Hamada, a special adviser to Japanese Prime Minister Shinzo Abe -- are applying some of those same concepts in their efforts to boost their respective countries’ economies.
