Franko Modigliani

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Completing his postgraduate studies at the New School in 1942, M. simultaneously began teaching at the Women's College of New Jersey, and in 1942-1944. was assistant in the Department of Economics and Statistics at Bard College at Columbia University. In the January issue of the journal "Econometrics" ("Econometrica") for 1944 appeared first published in English article M. "liquidity preference theory and Interest and Money" ("Liquidity Preference and the Theory of Interest and Money"), in which sets forth the provisions of his doctoral thesis. In 1944 he returned to New School as a lecturer and in the same year received his doctorate in social sciences. In 1946 he became an assistant professor of mathematical economics and econometrics, and in 1949-1952. professor at the New School. From 1945 to 1948 he worked as a researcher and chief statistician at the Institute of the world's problems in New York. During this period, Modigliani made his first contribution for the study of savings.

Getting a Professor degree, and work in MIT.

Turning to work at the University of Chicago in 1949, Modigliani entered the Cowles Commission for Research in Economics as a research consultant and worked there during the 1949/50 academic year. At the same time he accepted an invitation to the post of first Associate Professor of Economics (1949), and then the full (real) Professor of Economics (1950-1952) at the University of Illinois, led the work on the project "Expectations and Business Fluctuations".

Between 1952 and 1960. M. was a professor of economics and management industry in the Carnegie Institute of Technology (now Carnegie Mellon University), as well as a visiting professor at Harvard University (1957-1958). In 1960 he became a professor at Northwestern University. At the same time Modigliani started cooperation with the Massachusetts Institute of Technology (MIT), where worked as a visiting professor firstly, and in 1962 moved to the post of Professor of Economics and Finance. In 1970 he was appointed professor at MIT.

Views on Kenesian and monetarists theory.

In disputes between monetarists and Keynesians Modigliani never had a strong position, In contrast to M. Friedman, he sought to know the impact that money has on macroeconomic activity through various mechanisms of financial markets. Modigliani continued to work on these issues in the construction of large-scale financial section of the econometric model of the US economy, developed by MIT in the late 60s. by the order of the Federal Reserve. In the construction of this model Modigliani considered data of functioning of the international monetary, financial and payment system, the effect of anti-inflation stabilization of the government, various aspects of monetary policy. He denies simplified, in his view, approaches of the monetarist Milton Friedman. Overall Modigliani is supporter of one of the modern versions of the Keynesian theory and shares its political conclusions. He expressed his credo in the 60s. as follows: "If the private market economy needs to stabilize, it can and must be stabilized. ''

Hypotesis about life cycle savings.

In an effort to improve the "consumption function" M.Keynes and finding a rational basis for macroeconomic behavior in the actions of individuals, Modigliani was the first who described the process of creating models of "life cycle", which had to explain regularities of personal savings. He proceeded from the assumption that "the main motive (for savings) is to be able to maintain a decent standard of living." Savings, as he said, reflect the difference between the desired level of stable and changing consumer income, which for the working man's life is systematically increased from the initial low to the maximum, and then decreases to a very low during his retirement. Referring to the natural human desire to maintain a constant level of its consumption, despite fluctuations in income, Modigliani brought his famous formula: "young saves, old spends."

The first model of savings, based on life-cycle hypothesis, M. outlined in 1949 in his article " Fluctuations in the Saving-Income Ratio" and then set out in the published in 1954 article " Utility Analysis and the Consumption Function ", which he wrote with the University of Illinois graduate student R.Brambergom. Sudden death of R. Bramberg in 1955 prevented Modiglianis publishing a second article written by them together and devoted to the problem of aggregate savings. It was published only in 1980 'The Collected Papers of Franco Modigliani ". Modigliani developed his studies of the life cycle hypothesis further in a series of publications written in cooperation with A.Ando, ​​among which next works deserves main attention "Tests of the Life Cycle Hypothesis of Savings", (1957), "The Permanent Income and the Life Cycle Hypothesis of Saving Behavior ", (1960) and " The Life Cycle Hypothesis of Saving: Aggregate Implications and Tests ", (1963). In these publications Modigliani argued that the savings rate closely linked with the growth rate of the population, since this affects the rate of the ratio of people of different ages, as well as the retired population and most working age. He also argued that high rates of economic growth increases the savings rate, because they increase the incomes of working people (and savings made from this incomes) without increasing the consumption of people who retired, as their spendings correspond to a lower level of income during the past period of time. This conclusions Modigliani used in the article published in 1970 "The Life Cycle Hypothesis of Saving and Intercountry Differences in the Saving Ratio" to explain changes in the rules of savings at the international level. He also used theory of savings for testing alternative pension programs in the long-run

Theorem of Modigliani-Miller.

Modigliani contributed to macroeconomics with his research of the economic cycle and inflation, and in microeconomic theory- with analysis of relative prices and rational decision-making. Working in 50-ies at the Carnegie Institution, Modigliani studied the problem of optimal production and co-wrote with his colleague M. Miller two articles on the effects of the financial structure and dividend policy on the market valuation of the firm. Conclusions reached by the authors, are set out in the famous theorem of Modigliani-Miller, formulated in collaboration Modigliani and M. Miller, " ("The Cost of Capital, Corporation