James R. Killian Award & Lecture Series


Award recipients: Economics

Peter A. Diamond PhD '63
Lecture theme: Social Security and its Effect on the Economy
March 15, 2004

Institute Professor Peter A. Diamond was the 2003–2004 James R. Killian, Jr. Faculty Achievement Award winner. In 2010, he shared the Nobel Prize in Economic Sciences for his work in analysis of markets with search frictions. Among many other avenues of research he has pursued in his career, Professor Diamond helped develop studies from the late 1970s onward that examined the ways markets function over a period of time. This aspect of economic research—“search theory”—has been frequently applied to labor markets in the years since, in an attempt to see how the needs of individuals and employers are met. Professor Diamond discussed in his Killian Lecture how economists think about Social Security and its effects on the economy, described current projections of Social Security's financial problems, and offered proposals for restoring it to what is called "actuarial balance." Read more at MIT News.


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Franco Modigliani
Lecture title: "Life Cycle Hypothesis of Savings"
April 2 and 9, 1986

Institute Professor Franco Modigliani "was awarded the Nobel Prize for his pioneering research in several fields of economic theory that had practical applications. One of these was his analysis of personal savings, termed the life-cycle theory. The theory posits that individuals build up a store of wealth during their younger working lives not to pass on these savings to their descendents but to consume during their own old age. The theory helped explain the varying rates of savings in societies with relatively younger or older populations and proved useful in predicting the future effects of various pension plans.

Professor Modigliani also did important research with the American economist Merton H. Miller on financial markets, particularly on the respective effects that a company’s financial structure (e.g., the structure and size of its debt) and its future earning potential will have on the market value of its stock. They found, in the so-called Modigliani-Miller theorem, that the market value of a company depends primarily on investors’ expectations of what the company will earn in the future; the company’s debt-to-equity ratio is of lesser importance. This dictum gained general acceptance by the 1970s, and the technique Modigliani invented for calculating the value of a company’s expected future earnings became a basic tool in corporate decision making and finance." - Encyclopedia Britannica

A celebration of Professor Modigliani's life and work was held in 2013 at the MIT Sloan School of Management; an autobiography is available via the Nobel website; more at MIT News.

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Robert M. Solow
Spring 1978

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