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World Finance and Economic Stability

World Finance and Economic Stability

Selected Essays of James Tobin

James Tobin

Nobel Prize winner James Tobin has made outstanding contributions to modern macroeconomics. In this final collection of his work he examines the economic policies of the United States and its relations with other major economies after 1990. In James Tobin’s view, the welfare of populations depends uniquely on these policies and it is important to be aware of their impact.

Chapter 29: Between a market-based and a caring society: what kind of socially responsible economy do we want?

James Tobin

Subjects: economics and finance, financial economics and regulation


In my opinion, the developed economies of the democracies of Western Europe, North America, Japan, Australia, and New Zealand are best described as mixed economies, certainly since 1950. They are market economies in that most transactions for goods, services, land and natural resources, and human labor are voluntary purchases and sales. They are capitalist economies in the sense that most non-human means of production are private properties whose uses are decided by the owners or their agents. But democratic governments have a great deal to say about these decisions and activities. Governments own many productive enterprises and provide (free or subject to user charges) goods and services to the public. These span many areas: public safety and defence, parks, museums, libraries, recreation, roads and streets, transportation, public utilities, communications, education, public health, medical facilities, research, insurance, financial institutions, and many more. Despite the recent waves of privatization, governments’ weight in the economy remains substantial. Likewise, governments regulate in considerable detail private market transactions and the permissible uses of private property: what goods and services may be sold and bought, when, with what information and warranty, and often within what range of prices; what persons may be employed, at what wages and hours, and for how long; how real properties may be used. Moreover, governments’ taxes and transfers greatly alter the distributive impacts of markets on incomes and consumption. It is surely not true that government was more active in the economy in some idyllic era before World War II. It...

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