Jean Tirole, a French economist, won the 2014 Nobel in economic science on Monday, for his work on the best way to regulate large, powerful firms in industries, including banking and communications.
The Royal Swedish Academy of Sciences said Tirole, 61, had helped governments tame such firms by analysing when and how regulators should intervene to constrain activities, and when to stand back.
Tirole helped show “what sort of regulations do we want to put in place so large and mighty firms will act in society’s interest,” Tore Ellingsen, the chairman of the prize committee, said after the award announcement.
|KNOWING THE WINNER|
Tirole, a professor of economics at the University of Toulouse in France, has long appeared on lists of likely prize winners. His work gained particular attention after the 2008 financial crisis, which revealed profound shortcomings in the regulation of financial firms in the United States and Europe.
His work focuses on markets that lack the perfect competition portrayed in textbooks, where the push-and-pull among firms keeps prices low and quality high. In reality, many markets are dominated by a small number of firms that have the power to keep prices artificially high, and may lack incentives to improve quality. Furthermore, these firms tend to know much more than their regulators.
After earning a doctorate from the Massachusetts Institute of Technology in 1981, Tirole began to explore the regulation of such industries. His work has since shown that answers vary by industry, but it has also provided a kind of framework for constructing policies suited to an industry.
“Many of his papers show, ‘It’s complicated,’ rather than presenting easily summarisable, intuitive solutions, which make for good blog posts,” economist Tyler Cowen wrote in a blog post after the announcement.
In the wake of the financial crisis, Tirole has been an influential advocate for increased regulation of the banking industry. In an interview broadcast after the announcement, he applauded new liquidity regulations and said that governments needed to pay particular attention to the connections between regulated banks and unregulated parts of the financial system.
He also said that a more “global stance” was needed to regulate industries that increasingly operate on a global scale. He mentioned antitrust as an area of progress, and climate change regulation as an area of need.
Tirole told the Nobel Prize website, in a recorded interview, that he had asked his 90-year-old mother to sit down before sharing the news.
He said he himself had needed about 30 minutes to recover.
The past winners of the economics prize are an eclectic group that includes people with no formal training in economics and members of rival schools of economic thought.
The economics prize is the newest of the Nobels, created in 1969 in celebration of the 300th anniversary of the Bank of Sweden, the world’s first central bank.
©2014 The New York Times News Service