Franco Modigliani was born in Rome, son of a leading pediatrician, who died when Franco was 13. Modigliani's involvement with his future wife, Serena Calabi, and her remarkable father, Giulio, solidified his position as an antifascist.

He graduated from the University of Rome in Law (J.D.).in 1939, and promptly immigrated to the US. Modigliani became a citizen in 1944, and a Professor Emeritus of Economics at MIT.

Modigliani never returned to live in Italy although he would frequently visit, said his son, Sergio Modigliani. "He had an extraordinary career in economics and at the same time was a great family man," his son said. "Italy meant a great deal to him."

Through the years, he remained deeply interested in his native country's economy and politics. Italian President Carlo Azeglio Ciampi saluted him as "a friend, a great economist, an exile -- who never stopped profoundly loving Italy."
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OBITUARIES
FRANCO MODIGLIANI, 85; WINNER OF 1985 NOBEL FOR ECONOMICS
By Will Edwards
Bloomberg News
Los Angeles Times
September 26, 2003

Franco Modigliani, winner of the 1985 Nobel Prize for Economics for his theories about people's savings habits and the functioning of financial markets, died overnight in his Cambridge, Mass., home, the Massachusetts Institute of Technology said.

Modigliani, 85, who was a professor emeritus at MIT, was an economist in the style of John Maynard Keynes, the influential economist whose general theory held that households increase their spending as income rises but not to the same extent.

Modigliani's "life-cycle" theory of savings, which most recently has been used to analyze pension systems, held that people save only for themselves and not for their descendants, and that a person's savings rate wanes with age. On a macroeconomic level, he concluded that aggregate savings depend mainly on the rate of growth in a nation's economy.

The Italian-born economist was a supporter of government intervention in economic policymaking, and recently was critical of the Bundesbank's policies and the European central bank's decision to cut interest rates three times in the past nine months.

"These were very controversial views that weren't shared by everybody," said Vito Tanzi, who served as undersecretary of finance for Italy from 2001 to 2003, and who met Modigliani on several occasions at economic conferences. "If you were with him at dinner, he monopolized the conversation, but he was always extremely interesting."

Modigliani, in his work with economist Merton Miller, also was credited with sculpting in the mid-1950s the modern theory of corporate finance.

The pair developed a model relating financial markets to investor expectations, looking at the effects that a company's structure and its future earnings potential have on the market value of its stock. Their findings showed that the value of a company's stock depends mainly on investors' expectations of the company's future earnings. In this, they argued that neither the volume nor the structure of a company's debts has an impact on its value.

A later paper crafted by Modigliani and Miller found that, for a given investment policy, the value of a company is also independent of its dividend policy. The economists' theories were widely held as breakthroughs in the arena of corporate finance.

Modigliani was born in Italy in June 1918, the son of a physician. He initially studied law and left Fascist Italy in 1939 for the U.S. because he was both Jewish and anti-Fascist. He became a U.S. citizen in 1944.

Modigliani earned his doctorate from the New School of Social Research in 1944 and taught there from 1944 to 1949. He was a professor at Carnegie Institute of Technology from 1952 to 1960, at Northwestern University from 1960 to 1962 and at MIT starting in 1962. He was president of the American Economic Assn. in 1976.

Franco Modigliani, 85; Winner of 1985 Nobel for Economics
http://www.latimes.com/news/obituaries/
la-me-modigliani26sep26,1,7180487.story?coll=la-news-obituaries

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A MAGNETIC PROFESSOR'S RICH, CONNECTED LIFE IN ECONOMICS

Boston Globe
Wednesday, October 16, 1985

When a couple of dozen of his most successful students gathered near his vacation home in Martha's Vineyard last month to present papers on the occasion of Franco Modigliani's 67th birthday, MIT's Robert Solow cracked that he had discovered that Modigliani's name was not Italian, but rather Wampanoag Indian.

"It means either 'great creator' or 'great destroyer,' but it's not clear which," he said.

The point was that while Modigliani's career exhibited both
remarkable versatility and unusual duration - four decades since his first
important paper - his most striking gift was an ability to remain in nearly
constant connection with views of those around him. Whether creating new ways of
seeing or combatting them, Modigliani has led a rich, dense life in economics.

For example, when the Nobel Prize committee yesterday cited MIT's Modigliani
for two major contributions - his life-cycle savings hypothesis and his work on
corporate finance - he wanted to talk about a third, his work in the role of
expectations in economic life.

He has been a leading voice in the controversy that has dominated technical
economics for more than 20 years, the clash between the Keynesians, who
emphasize failures of markets, and the New Classicals, who tend to see only
their successes.

Indeed, the University of Rochester's Robert Barro yesterday fondly recalled
that it was in Modigliani's classroom that Barro first began to form the views
that have become the main - indeed the only - intellectual underpinning of the
Reagan admininstration's view that big deficits are not really very important.

Barro said, "He talked in the first class I had with him in 1969 a bit about
the life-cycle model and what would happen if you add into it bequests and other
concerns across generations. His view, as I recall, was that it was OK, but it
wouldn't make a lot of difference to your conclusions."

"If you accept that the typical person was concerned with their children,
though, you sort of gave up the whole ballgame," Barro continued. "If taxes fall
on your children rather than yourself, it's the same thing to you,
because you care about your children. It's as if people lived forever, and you no longer get the obvious real effects of deficits on savings or interest rates.

"This was the same Barro whose views Modigliani denounced as ''preposterous" in a high-spirited press conference called to mark his receipt of the 1985 Alfred Nobel Memorial Prize for economics, and the debate will continue as before. But it will never again be quite the same for Modigliani, an unreconstructed Keynesian of liberal views who has nevertheless managed to keep up with the changing times in an era of surging technical sophistication.

Nor has he been in any sense an ivory-tower economist. Peter Diamond, chairman of MIT's economics department, yesterday pointed out that it was Modigliani who took five years to build the large-scale model of the US economy that the Federal Reserve System still uses to gauge the expected effects of policy.

Yesterday, colleagues sifted through the details of a successful life in science: He has no book of his own, for instance, but a three-volume edition of his collected papers has been published. Modigliani once told author Arjo Klamer that he is accustomed to putting three hours in his study after supper; he lives in Belmont; he is habitually late to class.

An avid skier and tennis player, Modigliani once hit on the idea for a paper while volleying with Paul Samuelson. Yesterday, he said he might spend part of his Nobel award, which is expected to come to about $225,000, on upgrading his little laser-class sailboat.

Modigliani came to America in 1939, by way of Paris, where he married his wife Serena. His parents were a doctor and a child-development specialist, and he is no relation to the painter of the same name. In Italy, he studied law In America, he took out citizenship. It was only at the New School for Social Research in New York that he took up economics, in a seminar frequented by Jacob Oskar Lange, Tjalling Koopmans, Abba Lerner and Abraham Wald.

His first major paper, published in 1944, is still a standard citation in monetary theory; he published his major breakthrough on the life cycle in 1954; his pioneering work on the efficiency of financial markets came out in 1961. He taught at Carnegie Tech in Pittsburgh through most of the 1950s, and switched briefly to Northwestern University, before coming to MIT in 1962. Yesterday Samuelson credited Modigliani and his colleagues with having made ''tens of millions" for the school's endowment through canny investment advice

Throughout his career, Modigliani remained in close touch with the Italian political scene, where he enjoys a popular celebrity far beyond his American fame. He writes for a leading news magazine, advises politicians and the central bank, and has brought a series of remarkable Italian students to MIT, causing the magnetic pole of Italian economics to switch from Cambridge, England, where Piero Sraffa held sway, to Cambridge, Mass.

Indeed, yesterday it was his personal style, not his theoretical achievements, to which economists returned again and again. For example, John Bossons of the University of Toronto, an early collaborator, said, "He is a very enthusiastic advocate and has inspired a lot of people."

At the celebration on Martha's Vineyard last month, Modigliani surveyed with satisfaction the work of young collaborators, now pushing the frontiers of the life-cycle method towards its limits, and said, "All my students have outdone me in rigor, but this is perhaps not too hard." But he added, "I think there are a few things in economics that I can do that the average guy cannot do, not even in his gut."
Boston Globe Online / Table of Contents
http://www.boston.com/globe/search/stories/nobel/1985/1985r.html
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Franco Modigliani - Autobiography

Economics 1985
http://www.nobel.se/economics/laureates/1985/