He graduated from Harvard University, served as an economic advisor to the government of John F. Kennedy, and taught for many years at Yale University. In 1981 he won The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel.
Tobin advocated and developed the ideas of Keynesian economics. He believed that governments should intervene in the economy in order to stabilise output and avoid recessions. Tobin became widely know for his suggestion of a tax on foreign exchange transactions. This was designed to reduce speculation on currency markets, which he saw as unproductive. He also suggested that the proceeds of the tax could be used to fund projects for the benefit of Third World countries, or to support the United Nations.