19.85 Franco Modigliani

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1985 Franco Modigliani "for his pioneering analyses of saving and of financial markets"

Along with Merton Miller, he formulated the important Modigliani–Miller theorem in corporate finance (1958). This theorem demonstrated that under certain assumptions, the value of a firm is not affected by whether it is financed by equity (selling shares) or debt (borrowing money). He was also the originator of the life-cycle hypothesis, which attempts to explain the level of saving in the economy. Modigliani proposed that consumers would aim for a stable level of consumption throughout their lifetime, for example by saving during their working years and spending during their retirement.