Nobel Prize for Economics: Jean Tirole Takes on the Giants!
By Shlomo Maital
The Nobel Committee that selects winners for the Economics Prize has sent a message. This year (today, actually) they announced the winner is Jean Tirole, a French economist, who teaches at Toulouse, and who studied at MIT. He is honored for the following (according to the London Guardian):
“This year’s prize in economic sciences is about taming powerful firms,” Staffan Normark, permanent secretary of the Royal Swedish Academy of Sciences, said as he named Tirole the winner of the 8m kroner (£700,000) prize.
Tirole, 61, began his work on regulation and oligopolies in the 1980s and published an influential book in 1993 with the late Jean-Jacques Laffont on regulation. The judges said Tirole is “one of the most influential economists of our time”.
They added: “He has made important theoretical research contributions in a number of areas, but most of all he has clarified how to understand and regulate industries with a few powerful firms.”
The panel said Tirole had shown the “deep and essential differences” between regulating companies in different sectors, such as telecom companies or banks. Imposing caps on prices could reduce the influence of monopolies in some sectors, but not in others, the judges said, pointing to Tirole’s use of game theory and contract theory.
“In a paper last year, Tirole scrutinised, with Roland Bénabou, the pay and motivation structure in industries such as banking. They write about a “bonus culture that takes over the workplace, generating distorted decisions and significant efficiency losses, particularly in the long run”.
Tirole did not share the prize but won it alone. It is the first time since 1999 that an American has not at least shared the Economics Prize.
Will policymakers and politicians listen to Tirole? Yesterday I spoke with a family friend, a lawyer, who is leading a class action suit against a Detroit mortgage bank. He affirmed that the U.S. Justice Dept. has never prosecuted a single criminal case against Wall St. offenders, who nearly destroyed the world. They’re just too powerful, he said. Some groups spend $400,000 A DAY on lobbyists in Washington. Apparently, it’s a good investment. I am fantasizing a court case, criminal case, in which Jean Tirole is called as a witness for the prosecution.