Franco Modigliani

Franco Modigliani was an Italian-American economist who taught for most of his career at the Massachusetts Institute of Technology and won the 1985 Nobel Memorial Prize in Economic Sciences for his pioneering analyses of household saving and of corporate financial structure. His work shaped both modern macroeconomics and modern corporate finance.

Born in Rome in 1918 into a Sephardic Jewish family, Modigliani enrolled at the University of Rome to study law, but the racial laws enacted by Mussolini's regime in 1938 forced his family to flee, first to Paris and then in 1939 to New York. He earned a doctorate from the New School for Social Research in 1944 under Jacob Marschak, and held faculty posts at the New School, Illinois, Carnegie Mellon, and Northwestern before joining MIT in 1962.

Modigliani's life-cycle hypothesis, developed in the early 1950s with Richard Brumberg, argued that individuals smooth consumption over their working and retirement years rather than spending a fixed share of current income, recasting the way economists model aggregate saving. His Modigliani-Miller theorems, developed at Carnegie Mellon with Merton Miller and published in 1958, showed that under idealised conditions the value of a firm is independent of its capital structure.

He served as president of the American Economic Association in 1976 and of the Econometric Society in 1962, and remained an active commentator on European monetary policy and Italian economic affairs into his eighties. He died in Cambridge, Massachusetts, in 2003.

The name Franco is an Italian and Spanish given name meaning free or Frankish, originally a short form of Francesco; it is masculine.