French economist Jean Tirole today won the Nobel prize for economics for research on market power and regulation that has helped policy-makers understand how to deal with industries dominated by a few dominant companies.
Calling Tirole “one of the most influential economists of our time,” the Royal Swedish Academy of Sciences said he has made contributions in a range of research areas. But it highlighted his role in clarifying “how to understand and regulate industries with a few powerful firms.”
Tirole, 61, works at the Toulouse School of Economics in France and has a Ph.D. from Massachusetts Institute of Technology.
Left unregulated, industries that are dominated by a few single firms can produce undesirable results, such as unnecessarily high prices or unproductive companies blocking new competitive firms from entering the market.
From the mid-1980s, Tirole “breathed new life into research on such market failures,” the academy said, adding his work has strong bearing on how governments deal with mergers or cartels and how they should regulate monopolies.
“In a series of articles and books, Jean Tirole has presented a general framework for designing such policies and applied it to a number of industries, ranging from telecommunications to banking,” the academy said.
Harvard University professor and economist Philippe Aghion said on France’s BFM television today that Tirole’s work is particularly useful to governments as they try to determine the best level of regulation, notably regulation of banks after the global financial crisis in 2008.
“Tirole is at the frontier of this domain,” Aghion said.
In a 2012 interview, Tirole told the financial journal Les Echos that the 2008 financial crisis stemmed primarily from regulatory failure. “The vision according to which economists have unlimited trust in the efficiency of markets is 30 years behind the times,” he said.
It was the first economics prize without an American winner since 1999.
“I’m so moved,” Tirole said, speaking to a news conference in Stockholm on a telephone link from Toulouse.
The economics prize completed the 2014 Nobel Prize announcements. The awards will be presented on December 10, the anniversary of prize founder Alfred Nobel’s death in 1896.
Even though the economics award is not an original Nobel Prize — it was added in 1968 by Sweden’s central bank — it is presented with the others and carries the same prize money.
Last year, the economics prize went to three Americans who shed light on the forces that move stock, bond and home prices.