Franco Modigliani

Origins and early life

Franco Modigliani was born in Rome on 18 June 1918 into a Jewish family, the son of a paediatrician and a mother who worked as a volunteer social worker.

Work and career

He entered university at seventeen, reading law at the Sapienza, and in his second year won first prize in a national economics competition — an award he received from the hand of Benito Mussolini. The racial laws drove him out of Italy; he reached the United States and became a citizen in 1946. He taught at Illinois, then at Carnegie Mellon from 1952, and joined MIT in 1962 as an Institute Professor. His life-cycle hypothesis changed how economists think about saving: people do not save out of this year's income but spread a lifetime's earnings across a lifetime's spending, borrowing when young, saving in middle age, drawing down in old age — which explains why a country's savings rate depends on how its population is aged rather than on how rich it is.

With Merton Miller he also showed that, under stated conditions, how a firm is financed does not change what it is worth. He received the Nobel Memorial Prize in Economic Sciences in 1985. He died in Cambridge, Massachusetts, on 25 September 2003, still teaching at 85.