Franco Modigliani Was Prize-Winning Economist

Franco Modigliani of Cambridge and Chilmark, a Nobel Prize-winning economist, of Cambridge and Chilmark, died in his sleep Sept. 25. The MIT professor emeritus was 85.

Friend, fellow Nobel winner and MIT professor Paul Samuelson said Mr. Modigliani was the greatest living macroeconomist and a jewel in the university's crown.

Mr. Modigliani's life-cycle theory, which states that we make savings decisions based on the income we expect to have over our whole lives, revolutionized the way both economists and whole countries approach models of saving and consumption. He also developed insights on corporate finance; his collaboration with Nobel-winner Merton Miller led to a theory now taught to every first-year business student. The Modigliani-Miller propositions show that both a company's dividend policy and the amount of debt it carries are irrelevant to the company's valuation. For his contributions to the field, Mr. Modigliani received the Nobel Prize in Economic Sciences in 1985. He continued his work at MIT, where he held the prestigious title of Institute Professor, focusing his recent efforts on social security.

He lived a fascinating life, beginning in Rome in 1918, where he was born the son of a Jewish physician. His mother, Olga, was a social worker. The death of his father when Mr. Modigliani was 13 was a difficult tragedy of his childhood, he recounts in his autobiography, Adventures of an Economist. The family hoped he would follow his father and pursue medicine, but when he discovered he was sickened by the sight of blood, he chose to study law instead.

Restricted by the racial laws Mussolini instituted in 1938, and horrified by the rising tide of fascism, Mr. Modigliani fled to France with the family of his fiancée, Serena Calabi. The two were married at the Italian consulate in Paris; Mr. Modigliani's wife recalls her husband slipping her the ring on the stairs rather than present it to her in front of the presiding fascist consul.

The 20-year-old Mr. Modigliani returned briefly to Rome to accept his degree from the University of Rome's law school before leaving permanently for the U.S. just days before the beginning of World War II in 1939. He sold books in New York city to support himself while attending night school at the New School for Social Research. There he was inspired by his mentor, professor Jacob Marshak, who encouraged him to blend theoretical and empirical analysis. Largely self-taught to that point, Mr. Modigliani began a serious study of economics. In 1946 he became a naturalized U.S. citizen, joining Albert Einstein and Enrico Fermi as fascism's unwitting gifts to American academia. He went on to teach at Bard College, Carnegie Mellon, Northwestern, the University of Illinois and Harvard before settling at MIT in 1962.

The Modiglianis first came to the Vineyard in the summer of 1951 with their two young sons. They stayed with Pauline Vanderhoop at the Totem Pole bed and breakfast in Gay Head. Overcome by the Island's natural beauty and the warmth of its people, they later bought a home in Chilmark. "It was love at first sight," Mr. Modigliani said in a 1986 Gazette interview; "you could go to the beach and see nobody." The interview took place on a lovely, clear Saturday afternoon, and Mr. Modigliani was just back from the races on Menemsha Pond, where he was a familiar face on the water late into his 70s.

Mr. Modigliani's work and racing figured heavily in his summer routine. "I try to work about six hours every day," he told the Gazette, "but I don't let things interfere with my racing."

He loved to be outside gathering the Vineyard's bounties, whether it was digging at Clam Cove or picking blueberries - one for him, one for the bucket - in dutiful preparation for his wife's famous blueberry jam.

Ever curious, and always ready to collaborate, Mr. Modigliani was beloved by his students for his interest in their lives and work. His spirit lives on in hundreds of personal devotees who fill the top spots at banks, universities, oversight boards and companies around the world, from China to Italy, the World Bank to Wall street.

His professional collaboration even extended to his family; a few years ago, he worked with his granddaughter, Leah, to develop a theory - Modigliani-Modigliani - for measuring the risk-adjusted performance of stocks.

Still, he was treasured by his grandchildren not as an economist, but as "Nonno Bonno," a wonderfully sweet, playful and loving grandfather. "He wasn't just a brilliant thinker, but also a special communicator," said his grandson David.

"He related to us at every age; always interested in our little worlds, always finding just the right joke or story, song or question that would nudge us into expanding our awarenesses while simultaneously confirming the magic of life. To see him lying on the floor at 85, lighting up the faces of my little cousins with his twinkling blue eyes, minutes after lighting up the face of a serious 60-year-old colleague - that was to witness just how marvelous was the reach of his mind, how truly radiant his being."

Mr. Modigliani is survived by his wife of 64 years, Serena Calabi Modigliani of Cambridge; his sons Sergio, of Brookline and Chilmark, and Andre of Ann Arbor and Chilmark, four grandchildren and three great-grandchildren.

A memorial service will be held at MIT on Dec. 7. Memorial gifts may be made to the American Friends Service Committee, 1501 Cherry street, Philadelphia, PA 19102.