French economist Jean Tirole won the 2014 Nobel Prize for economics for work that has shed light on how governments can “tame” the big businesses that dominate once public monopolies like railways, highways and telecommunications.
“This year’s prize in economic sciences is about taming powerful firms,” Staffan Normark, permanent secretary of the Royal Swedish Academy of Sciences, told a news conference after awarding the eight-million Swedish crown ($1.1-million) prize.
The academy said Tirole has clarified policies about regulating industries with a few powerful firms, especially after a wave of privatisations had set governments a conundrum over how to encourage private investments in sectors like healthcare and railways while reining in profits.
Insufficient regulatory institutions
“I’m very honoured,” Tirole told a news conference over the phone. Tirole has worked for decades on the effects of credit bubbles, and said the 2008 to 2009 financial crisis was above all the result of insufficient regulatory institutions.
“I think banking is a very hard thing to regulate and we economists and academics have to do more work on this,” Tirole said, speaking from Toulouse, where he is a professor at the school of economics.
In a 2012 French media interview, he said it was “shocking” how United States authorities had supported investment banks which, because they did not have small depositors, were not subject to full regulation.
His Nobel award was quickly hailed by Emmanuel Macron, the former merchant banker who is now France’s economy minister.
“Huge congratulations to Jean Tirole who does our country and French economic learning proud,” he tweeted.
Tirole’s research showed market regulations should be adapted to the conditions of specific industries rather than general principles that would apply to every industry, the academy said.
“He has been the dominant figure in industrial organisation. It was not a question of whether but when he would be awarded the prize,” said Oxford University economics professor Paul Klemperer. “It has given us understanding of how to think about regulating firms, that there is not one size fits all.”
The economics prize, officially called the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, was established in 1968. It was not part of the original group of awards set out in the 1895 will of Nobel, the inventor of dynamite.
Economists from the US have dominated the prize – with only a few winners coming from other parts of the world – since 1994.
This year has been good to France over the Nobels, with Patrick Modiano winning the literature prize. French economist, Thomas Piketty also scored an international bestseller this year with his book on inequality, Capital in the Twenty-First Century.
While economists are rarely household names, previous winners include well-known figures such as Paul Krugman, Milton Friedman, Friedrich August von Hayek and Joseph Stiglitz. – Reuters