MIT Professor Awarded Nobel Economics Prize

An MIT professor yesterday won the Nobel Prize for economics for his theories on individual savings and corporate finance, which he has been developing since the '50s.

Franco Modigliani, a 67-year-old economics professor who has taught at MIT since 1962, argues that people save less for old age when they have improved pensions to count on. In his theories of corporate economics, Modigliani holds that firms should focus on increasing the value of their stock, not necessarily their profits.

"It was never a case if he would get it, but when," said Paul Samuelson of MIT, 1970 American Noble laureate. "A large body of opinion thinks it's overdue."

Modigliani also earned praise from Harvard economists. "It couldn't have gone to a more attractive man and it couldn't have gone to a better economist," said John Kenneth Galbraith, Warburg Professor of Economics Emeritus. Professor of Economics Lawrence H. Summers called the prize "well deserved."

Explaining some of his work, Modigliani told the Associated Press yesterday that his savings theory is based on the idea that people save and corporations invest according to their immediate circumstances.

"I thought the main reason people saved had to do with consumption wishes. They saved whenever they had more money than usual and they didn't save when they had less," Modigliani said.

The Nobel Prize in economics, created in 1969 by Sweden's central bank, is awarded by the Royal Swedish Academy of Sciences and carries a $225,000 prize. Modigliani is the 13th American to receive this prize in 17 years.

Modigliani has lived in the United States since 1939, when he fled fascist Italy. Before coming to MIT, he taught at Carnegie-Mellon, Northwestern and several other schools.