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Franco Modigliani: 1918-2003

MIT Nobelist took work seriously, but not himself
Franco Modigliani talks on the phone on the day in 1985 that he learned he had won the Nobel Prize in economics.
Franco Modigliani talks on the phone on the day in 1985 that he learned he had won the Nobel Prize in economics.

The MIT community is mourning the loss of Professor Franco Modigliani, a Nobel laureate who always took his work seriously but never himself.

Modigliani, who won the Nobel Prize in economics in 1985 for his pioneering analyses of savings and financial markets, died Sept. 25 in his sleep at his home in Cambridge. He was 85 years old.

Modigliani, who was extremely proud of his MIT affiliation, wore a school tie to the press conference when he won the Nobel Prize. Later in the day, he celebrated by playing tennis with his friend and 1970 Nobel laureate, Professor Paul Samuelson.

"We played doubles," Samuelson recalled. "An intense tennis player, he never stopped moving. He was so intense, he once ran into a cement wall trying to get the ball."

Samuelson's wish to collaborate with Modigliani came to fruition on a tennis court. "One day, between serves, he asked me what I thought of a new theory," Samuelson said. "I admitted I hadn't heard of it. He explained it. We kept playing. I responded. Our collaboration was born right there."

Modigliani's final collaborator was his granddaughter Leah, a vice president with Morgan Stanley in New York.

Modigliani's work in economics arose from the ideas of John Maynard Keynes. He contributed the "life-cycle hypothesis," a theory about how people save for retirement that has aided countries to formulate pension plans.

The Nobel committee also commended Modigliani for his work in the late 1950s with Merton Miller, who won the Nobel Prize in 1990. The two produced essays known as the "M&M papers" which argued that corporate value depended not only on debt structure but also on investor expectations.

"Franco Modigliani could have been a multiple Nobel winner," Samuelson said. "When he died he was the greatest living macroeconomist. He revised Keynesian economics from its Model-T, Neanderthal, Great Depression model to its modern-day form."

Samuelson noted that Wall Street is populated by numerous experts who studied with Modigliani. His students also included Nobel laureate Robert Merton, a 1997 winner.

"He was a great teacher, intense and colorful," Samuelson said. "MIT was lucky to have him for 40 years; he was a jewel in our crown."

Modigliani was known for his work on corporate finance, capital markets, macroeconomics and econometrics. He had appointments in the Department of Economics and the Sloan School of Management.

Modigliani, who joined the MIT faculty in 1962, had degrees from the University of Rome and the New School for Social Research in New York City. He taught and did research at several universities before joining the faculty at the Carnegie Institute of Technology in 1952.

He came to MIT as a professor of economics and finance and in 1970 was named an Institute Professor, a title MIT bestows on faculty who have achieved exceptional distinction in leadership, accomplishment and service to the Institute and wider community. He became professor emeritus in 1988.

Modigliani received MIT's James R. Killian Faculty Achievement Award in 1985. The Modigliani Professorship of Financial Economics, an endowed chair, was established in 1995.

In 2001, Modigliani wrote an autobiography, "The Adventures of an Economist."

Born on June 18, 1918, Modigliani was the son of a pediatrician and a volunteer social worker. Modigliani, who was Jewish, met his future wife, Serena Calabi, through his involvement with student anti-fascist activists in the early 1930s. When the Italian racial laws were passed in 1938, he joined the Calabi family in Paris, where he and Serena were married. They came to the United States in August 1939.

Active and involved until the end, Modigliani enlisted fellow MIT Nobel laureates in economics Samuelson and Robert M. Solow to collaborate on a letter published in the New York Times on Sept. 23. In the letter, they chided the Anti-Defamation League for honoring Italy's prime minister, Silvio Berlusconi, who had been quoted as saying that "Mussolini did not murder anyone."

Their letter said, in part: "Mussolini was responsible for the death of many political opponents, Partisans and Jews. He persecuted Jews with his racial laws and ... was responsible for the deportation of almost 7,000 Jews, who died in Nazi camps.

"Mr. Berlusconi has apologized to Italian Jews for his statements. This is not enough; he has not apologized to Italians generally."

Modigliani was a member of the National Academy of Sciences and the American Academy of Arts and Sciences. He also served as president of the Econometric Society, the American Economic Association and the American Finance Association. He was a consultant to the U.S. Treasury, the Federal Reserve System and a number of European banks.

A slight, gregarious man, Modigliani enjoyed skiing, tennis and sailing. He used some of his $225,000 Nobel Prize money to upgrade his Laser-class sailboat.

Besides his wife, Modigliani is survived by two sons: Andre, a professor of sociology at the University of Michigan, and Sergio, of Brookline, an architect; four grandchildren and three great-grandchildren.

Donations in Modigliani's memory may be made to the American Friends Service Committee, 1501 Cherry St., Philadelphia, PA 19102. A memorial will be scheduled.

A version of this article appeared in MIT Tech Talk on October 1, 2003.

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