Franco Modigliani – economist

Writer and professor developed theories about spending and saving

Franco Modigliani studied in Rome
before emigrating to America

Nobel prize winner Franco Modigliani, who was an originator of the economic life-cycle hypothesis that attempts to explain the level of spending in the economy, was born on this day in 1918 in Rome.

He wrote several books outlining his economic theories, became a professor at three American universities, and received the Nobel Memorial Prize in Economics in 1985. 

Modigliani also formulated the Modigliani-Miller theorem for corporate finances, which is based on the idea that the value of a private firm is not affected by whether it is financed by equity or by debt.

Born and brought up in a Jewish family, Modigliani enrolled in the Faculty of Law at the Sapienza University of Rome at the age of 17. In his second year at Sapienza, his entry in a national economics contest won first prize and he was presented with it by the Fascist dictator, Benito Mussolini.

Modigliani went on to write essays for the Fascist magazine Lo Stato, displaying an inclination for the fascist ideals that were critical of liberalism at the time.

He argued the case for socialism in an article for the magazine about the organisation and management of production in a socialist economy.

But after racial laws were passed in Italy in 1938, he left Rome, with his girlfriend, Serena Calabi, whose father was a prominent opponent of Mussolini, to join her parents in Paris.

The neoclassical main building of the Massachusetts
Institute of Technology - Modigliani's base for many years

He returned to Rome to discuss his thesis and obtain his diploma in 1939, but afterwards went back to Paris.

Later that year, Modigliani emigrated with his girlfriend’s family to the United States, where he enrolled  at the New School for Social Research in New York. The PhD dissertation he submitted there was judged to be ‘ground breaking’.

Modigliani taught at Columbia University and Bard College in New York between 1942 and 1944 and became a naturalised citizen of the US in 1946. He later taught at the University of Illinois and Carnegie Mellon University before becoming an Institute Professor at the Massachusetts Institute of Technology (MIT).

He developed the hypothesis that consumers aim for a stable level of consumption during their lifetime by saving during their working years and spending during their retirement. Economists believe this was an original theory when he introduced it in a paper written in 1954. 

Modigliani also introduced the concept of the NIRU, the non-inflationary rate of unemployment, which referred to the level of unemployment, below which inflation rises, which he believed should influence policy decisions.

Modigliani in 2000: he continued
to teach well into his 80s

Modigliani married Serena Calabi in 1939 in Paris and they had two children, Andre and Sergio. 

With Leah Modigliani, his granddaughter, who followed him in becoming an economist, he developed the Modigliani Risk-Adjusted Performance, a measure of the risk-adjusted returns of an investment portfolio.

His Nobel prize was awarded to him for his pioneering analyses of saving and financial markets and in the same year he received MIT’s James R Killian Faculty Achievement award. 

In 1997, he received an honoris causa degree in Management Engineering from the University of Naples Federico II.

Modigliani became a trustee of the Economists for Peace and Security organisation and was an influential adviser to the Federal Reserve, designing a tool to guide monetary policy in Washington.

A collection of Modigliani’s economic papers is now housed in the Duke University’s Rubenstein Library in Durham, North Carolina.

Modigliani died in 2003 at the age of 85 in Cambridge, Massachusetts, where he taught until the last six months of his life.  Two years before his death he had written about his life as an economist in his autobiography, Adventures of an Economist.

Marcello Piacentini's modern campus at the
Sapienza University of Rome

Travel tip:

The university Franco Modigliani attended in Rome is often known simply as La Sapienza, which means ‘the wisdom.’  It can trace its origins back to 1303, when it was opened by Pope Boniface VIII as the first pontifical university. In the 19th century the University broadened its outlook and a new campus, designed by Urban theorist and architect, Marcello Piacentini, was built near the Termini railway station in 1935. Rome University now caters for more than 112,000 students.

The Via della Conciliazione, also designed by
Marcello Piacentini, frames St Peter's Basilica

Travel tip:

Architect Marcello Piacentini studied arts and engineering in Rome and afterwards worked for the Fascist Government. He developed a simplified neoclassicism which became the mainstay of Fascist architecture and as well as designing the new campus for  La Sapienza, he was responsible for the redesign of the road approaching St Peter’s in Rome, Via della Conciliazione. Roughly 500m long, Via della Conciliazione connects St Peter's Square to the Castel Sant'Angelo on the western bank of the Tevere (Tiber) river. A great many buildings, many of them residential, had to be requisitioned and demolished to create space for the road, which was constructed between 1936 and 1950 as the primary access route to St Peter's Square.

Also on this day:

1466: The birth of music printer Ottaviano dei Petrucci

1511: The birth of sculptor and architect Bartolomeo Ammannati

1943: The birth of actress, singer and TV presenter Raffaella Carrà

1946: The birth of football manager Fabio Capello

1952: The birth of actress Isabella Rossellini

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Ferdinando Galiani - economist and philosopher

Leading figure in the Neapolitan Enlightenment

Ferdinando Galiani spent much of
his life in government service

The economist and philosopher Ferdinando Galiani, whose theories on market economics are considered to be years ahead of his time, was born on this day in 1728 in Chieti, now in Abruzzo but then part of the Kingdom of Naples.

Galiani spent much of his life in the service of the Naples government, spending 10 years as secretary to the Neapolitan ambassador in Paris before returning to Naples in the role of councillor of the tribunal of commerce, being appointed administrator of the royal domains in 1777.

A fine writer and wit as well as a talented economist, Galiani wrote a number of humorous works as well as two significant treatises, the first of which, Della Moneta, was written while he was still a student, at the age of 22.

Initially published anonymously, Della Moneta - On Money - was ostensibly a work about the history of money and the monetary system, but Galiani used it as an opportunity to intervene in the Neapolitan debate on economic reform, his opinions on the development of the Neapolitan economy evolving into a theory of market value based on utility and scarcity.

At the same time, he put forward what was then a revolutionary notion of the importance of freedom to the well-being of any society, one shared by many contemporary thinkers, including the French writer and philosopher Voltaire.

Advancing arguments based on the principle of personal freedom, Galiani suggested that the value of anything should be determined by the mutual agreement of buyer and seller, with prices and wages set naturally according to demand.

Galiani's seminal work, Della
Moneta, which he wrote at 22

He argued that any form of control of the market would lead to injustices in society and could therefore be defined as tyranny. 

Galiani’s views on fairness could almost certainly be attributed to the education he received from his uncle, Monsignor Celestino Galiani, a prominent archbishop, whose intention was to prepare his nephew for a life as a clergyman.

In the event, Galiani revealed a talent not only for economics but as a witty writer, whose clever parodies of the Neapolitan literary style established his reputation as a humorist. In all his writing, however, he was faithful to the fundamental principles of truth and justice imbued in him by his uncle. 

During his time in Paris, Galiani wrote his second important treatise, Dialogues sur le commerce des blés - Dialogues on the Grain Trade - in which he argued in favour of regulation of the corn market on the basis that free international trade in grain, not so much a commodity as a necessity, risked the wellbeing of the population if foreign markets were more attractive to producers than domestic ones.

Galiani wrote fluently in both French and Italian, and his letters are seen as valuable for their depiction of economic, social, and political life in 18th-century Europe. He died in Naples in 1787 at the age of 58.

Chieti's Baroque Cathedral
of San Giustino

Travel tip:

Chieti, the capital of the Abruzzi region, is among the most historic Italian cities, reputedly founded in 1181BC by the Homeric Greek hero Achilles and named Theate in honour of his mother, Thetis. The city is notable for the Gothic Cathedral of San Giustino, which has a Romanesque crypt dated at 1069 but is mainly of later construction, having been rebuilt a number of times, usually because of earthquake damage.  The main part of the cathedral is in early 18th century Baroque style.  Situated about 20km (12 miles) inland from the Adriatic city of Pescara, the city consists of Chieti Alta, the higher part and the historic centre, and the more modern Chieti Scalo.

Pescara, with the snow-capped mountains of the
Gran Sasso range in the background

Travel tip:

Pescara, a city of almost 120,000 people on the Adriatic in the Abruzzo region, is known for its 10 miles of clean, sandy beaches, yet is only 50km (31 miles) from the Gran Sasso mountain range, the snow-capped peaks of which are visible even from the coast on a clear winter’s day. The city is the birthplace of the poet, patriot and military leader, Gabriele D’Annunzio. His childhood home, the Casa Natale di Gabriele D’Annunzio, which can be found in the historic centre of the city on the south side of the Fiume Pescara, which bisects the city, houses a museum about his life and works. The Museo delle Genti d'Abruzzo has exhibitions on regional industries like ceramics and olive oil. Pieces by Miró and Picasso are on view at the Vittoria Colonna Museum of Modern Art.

Also on this day:

1684: The birth of cook and unlikely war hero Maria Bricca

1916: The death of composer Paolo Tosti

1930: The birth of fashion designer Roberto Capucci

1946: The birth of fashion designer Gianni Versace

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Carlo Cipolla - economic historian

Professor famous for treatise on ‘stupidity’

Carlo Cipolla's tongue-in-cheek book about human stupidity
became a bestseller in Italy

Carlo Maria Cipolla, an economic historian who for many years was a professor at the University of California, Berkeley and taught at several Italian universities, was born on this day in 1922 in Pavia.

He was one of the leading economic historians of the 20th century and wrote more than 20 academic books on economic and social history but also on such diverse subjects as clocks, guns and faith, reason and the plague in 17th century Italy.

Yet it was for his humorous treatise, The Basic Laws of Human Stupidity, that he became famous. The book, written very much tongue in cheek, became a bestseller in Italy after it was published in 1976.

In it, Cipolla produced a graph that divided the human species into four types, each sharing one characteristic of another type.

He proposed that there are (a) bandits, whose actions bring benefits for themselves but losses for others; (b) intelligent people, whose actions bring benefits for themselves and for others; (c) naive or helpless people, whose actions bring benefits for others but who tend to be exploited and therefore incur losses for themselves; and (d) stupid people, whose actions result not only in losses for themselves but for others too.

His Five Laws of Human Stupidity argued that everyone underestimates the number of stupid people in society, that certain people had a strong likelihood of being stupid irrespective of other characteristics, that a stupid person inevitably causes losses to other people while deriving no gain from his or her actions, that non-stupid people repeatedly underestimate the damage likely to result from dealing or associating with stupid people, and that because of the lack of predictability and logic in a stupid person’s behaviour, a stupid person was more dangerous than a bandit.

The matrix that Cipolla included in his Basic Laws
of Human Stupidity was something like this

Growing up, Cipolla’s ambition was to teach history and philosophy in an Italian high school.

He studied political science at Pavia University but thanks to one of his professors he discovered his passion for economic history, which he subsequently studied at the Sorbonne and the London School of Economics.

After obtaining his first teaching post in economic history in Catania in Sicily at the age of 27, he embarked on an academic career that would see him appointed to positions at the universities of Venice, Turin and Pavia, the European Institute in Florence and the Scuola Normale Superiore in Pisa.

He began teaching at UC Berkeley in 1959 and, for more than 30 years, Cipolla and his American-born wife Ora divided their year between Berkeley, where they would spend the late summer and autumn, and Pavia, to which they returned for spring and early summer.

Cipolla was a member of the Royal Historical Society of Great Britain, the British Academy, the Accademia dei Lincei, American Academy of Arts and Sciences and the American Philosophical Society of Philadelphia. He was awarded the Premio della Presidente della Repubblica in Italy, and the Premio Balzan, as well as honorary degrees in Italy and Zurich, Switzerland.

His wide range of interests was evident in his passion for collecting as well as academic study. His homes were filled with impressive collections of ancient coins, old clocks, 18th century Italian paintings and Roman surgical instruments among other things.

Cipolla died in Pavia in 2000 at the age of 78, having for many years suffered from Parkinson’s Disease.

The Certosa di Pavia, which dates back to 1396

Travel tip:

Pavia is a city in Lombardy, about 46km (30 miles) south of Milan. Its university was founded in 1361 and was the sole university in the Duchy of Milan until the 19th century. Its alumni include explorer Christopher Columbus, physicist Alessandro Volta and the poet and revolutionary Ugo Foscolo. Pavia is also famous for its Certosa, a magnificent Renaissance monastery complex north of the city that dates back to 1396 and includes a number of important sculptures and frescoes. A pretty covered bridge over the River Ticino leads to Borgo Ticino, where the inhabitants claim to be the true people of Pavia.

The Palazzo dei Cavalieri, main seat of the Scuola
Normale Superiore in Pisa

Travel tip:

The Scuola Normale Superiore - known and the Scuola Normale Superiore di Pisa until it was expanded to include faculties in Florence in 2014 - is often known in Italy simply as the Normale. Opened in 1810, its origins are in the Napoleonic era, when it was the equivalent of France’s École normale supérieure. The adjective "normal" was used in the sense of teaching societal “norms". In the 19th century, teachers' training schools were called "normal" schools for this reason.  Many scientists, researchers and intellectuals, as well as prominent public figures, including two Presidents of Italy, were students there. It admits only a relatively small number of students per year and is seen as one of the most prestigious universities in Italy.

More reading:

The University of Pavia professor known as the 'father of criminology'

Alessandro Volta - the scientist who invented the first electric battery

Ugo Foscolo - poet and revolutionary

Also on this day:

1702: The birth of landscape painter Francesco Zuccarelli

1944: The birth of fashion designer Gianfranco Ferré


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